SME Supporting Factor

Bank supervision - capital adequacy - Risk Weighted Assets (RWAs) - credit risk - small and medium-sized enterprises (SMEs).

The SME Supporting Factor is a capital adequacy provision that reduces the regulatory risk weighting applied to lending to small and medium sized enterprises.

This reduces the amount of regulatory capital required to be held by the lender, and - in turn - helps to reduce the cost of lending to SMEs.

"The SME Supporting Factor continues to be the biggest issue for banks.

They’ve always maintained that if the supporting factor is withdrawn at some point it will need to feed through into the cost of credit and credit appetite itself."

(Nala Worsfold, head of financial and risk policy at UK Finance, quoted in The Treasurer, Issue 4, December 2023, p15)

See also

• Bank supervision
• Basel 3.1
• Capital
• Capital adequacy
• CET1 ratio
• Credit
• Credit Conversion Factor (CCF)
• Infrastructure Supporting Factor (ISF)
• Internal Models Approach (IMA)
• Off balance sheet risk
• Operational risk
• Output floor
• Pillar 1
• Risk Weighted Assets (RWAs)
• Small and Medium-sized Enterprises (SMEs)
• Standardised Approach (SA)
• Total capital ratio
• UK Finance