This can give rise to the so-called “financial accelerator” channel of the Monetary Transmission Mechanism (MTM), in which monetary policy works partly by affecting lending terms through its effect on asset values and so the net worth of borrowers. 3 But credit conditions also depend on the access to credit of the lenders themselves.
There is an important distinction here between intermediation across bank balance sheets and via the capital markets, although as I shall describe it turns out to be blurred. Total credit: capital markets and securitisation For the moment, I shall put that distinction to one side in order to focus on total credit.