Why Banks Now Treat Small Businesses as Structured Credit
Executive Summary
The era of relationship banking for SMEs is structurally over. Driven by the full implementation of Basel 3.1 in 2025–2026, global banks have reclassified SMEs from "clients" to "portfolio buckets" to facilitate securitisation. Our analysis indicates that regulatory pressure to minimize Risk-Weighted Assets (RWA) has forced banks to adopt an "originate-to-distribute" model. SMEs that cannot be algorithmically standardized for sale to credit investors now face a binary outcome: automated rejection or punitive pricing.
Diagnostic Analysis
The "Computer Says No" phenomenon is a regulatory compliance success. Mechanisms like the RWA Trap and Securitisation Exits mean that if your business cannot be digitized into a standardized data row, it is no longer profitable for a Tier 1 bank to hold you.
Exhibits
Click quadrants to identity your position.
Compare the regulatory capital a bank must hold for a Mortgage vs an SME Loan.
Assumes Mortgage RW 35%, SME RW 100%, Capital Ratio 8%.