Starting in 2014 with the implementation of the European Commission Capital Requirement Directive, banks operating in the Euro area were benefiting of a 25% reduction (the supporting factor or SF hereafter) in own funds requirements against SME loans. We investigate empirically whether this reduction has supported SME financing and to which extent it is consistent with SME credit risk. Economic capital computations based on multifactor models do confirm that the capital requirement should be lower for SMEs. Taking into account the uncertainty surrounding their estimates and adopting a conservative approach, the SF is consistent with the difference in economic capital between SMEs and large corporates. The probability of an extension of credit as well as the probability of obtaining a new loan are both positively affected by the eligibility to the SF. Moreover, the SF has an unintended consequence in the form of rationing relatively more marginally ineligible firms.