In response to these concerns, the final version of the new Accord (published in June 2004) was modified so as to ease its impact on the SME market. Modifications concerning how banks will reassess SMEs include:
* Banks using the Internal Ratings Based Approach (IRB) approach will be allowed to allocate a lower capital requirement for lending to SMEs with an annual turnover of up to € 50m.
* Banks that group and manage their lending to small businesses (for loans up to EUR 1m) on a pooled basis will be able to treat these assets as retail exposure, thus benefiting from a preferential risk-weight curve.
* A wider range of collateral and guarantees is permitted than under the current arrangements, which will permit banks to reduce the capital they are required to allocate to such secured lending. This is particularly relevant to the SME loan sector.
