The Spanish corporate finance promotion law (Ley 5/2015 de fomento de financiación empresarial) governing changes to corporate financing allows for more flexible financing of Spanish SMEs.

Paragraph one could reduce default risk of Spanish SMEs providing them with new mechanisms to plan their liquidity and bridge gaps more effectively. Therefore it is credit positive for Spanish SMEs and consequently beneficial for Spanish SME CLOs - granular securitisations of credit rights over SME obligors. At the same time Scope highlights the provisions in the law that could undermine its desired effects.

The report examines the two main tools provided for under Paragraph I of the new law. Once it comes into force, banks are required to notify SME customers in case the bank decides to reduce or terminate an existing financial commitment. Additionally, banks are obliged to provide an SME with certain financial information upon notification or upon request.

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