The promotion of a more stable European banking system has become a priority which, not doubt, will bring important benefits to firms. However, bank stability comes with stronger regulations that could harm the access to finance of small and medium-sized enterprises (SMEs), which are highly dependent on bank financing. We provide new evidence on the association between the stability of a country’s banking system and SMEs access to finance through the study of borrower discouragement. We analyze 20,207 observations gathered among 16,382 firms operating in the EU-28 during the period 2011–2018. Applying multilevel methodology, our results show that SMEs operating in countries with more stable banking systems are less likely to be discouraged from applying for a loan. Working to achieve a more stable banking system does not seem to harm the access to finance of SMEs.
Bibliographical noteFunding Information:
The authors acknowledge financial support from Agencia Estatal de Investigación ( https://doi.org/10.13039/501100011033 ), research project PID2019-106314GB-I00/AEI/10.13039/501100011033. We also acknowledge financial support from Fundación UCEIF and Santander Financial Institute (SANFI).
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