For these small loans, the spread between vulnerable and more resilient countries has now narrowed to a record low of 5 basis points. This more even credit pricing across countries and firms has, in turn, been crucial to the broadening of the economic and employment recovery, not least because SMEs represent 60% of euro area value added and employ 70% of the labour force.
The second way in which stronger supervision has supported our monetary policy is by helping contain any financial stability risks that may emerge during a long period of low rates. One channel through which such risks can appear is search-for-yield effects: low rates can, in principle, induce banks into making lower-quality loans, leading to higher loan losses.