The transmission of EPU to bank lending could differ with respect to firm size as
well. Indeed, when bank lending is constrained, small and medium-sized
enterprises (SMEs) tend to be affected more than larger corporations, which are
usually less dependent on bank loans. 16 This is partly due to most SMEs not
being able to tap capital markets.
Lack of data limits an analysis of lending to SMEs versus large corporations
separately. Yet volumes of small and large loans are available. Small loans
(loans with a volume of less than EUR 1 m) are more likely to be to SMEs and
can serve as a proxy of SME lending. Our analysis indicates that there is indeed
some asymmetry in the impact of EPU.
In Spain, the negative correlation of
EPU and SME lending is twice as large as the correlation of EPU and lending to
large corporations. In France, results are similar. In Italy, both SME and large-
cap lending show a high negative correlation with EPU. Independent of firm
size, Italian banks have generally been risk averse, especially in recent years,
due to extraordinarily high levels of non-performing loans on their balance
Only in Germany, and in line with our previous results, is the link
between EPU and corporate lending negligible for both SMEs and large firms.