For solid businesses with good growth prospects, the difficult conditions of the market for bank credit are a powerful stimulus to tap the capital markets. On the banks’ side, an advanced financial system would enable them to diversify their sources of revenue, maintain a balanced loan-todeposit ratio and share the risks of financing customers with the markets.
While paying due attention to conflicts of interest, banks can encourage firms’ recourse to the market by exploiting the advantage in assessing creditworthiness that derives from their long-term relationships. The capital strengthening of firms and their opening to the capital markets also require farreaching changes in the entire financial system.