A spanner in the works

The US and Germany are in a standoff over Basel II’s capital charge calculation for SME lending. Without a compromise this month, the issue threatens to derail implementation of the Accord and the European Directive.

When the Basel Committee issued its second consultative document proposals (CP2) for a new regulatory capital Accord in January, it prompted fierce opposition from banks, academics and lobbying groups over its treatment of loans to small- to medium-sized enterprises (SMEs). This sector is the backbone and growth engine of many major economies. Now, nearly a year later, the issue has come to a head. The US and Germany – which is fiercely protective of its SME sector, the mittelstand – are