an additional channel through which monetary policy can be transmitted if the bank lending channel becomes impaired again in the future. Second, it reduces banks’ market power, 4  BIS central bankers’ speeches  which may tend to make bank lending rates more responsive to monetary policy.
Indeed, recent research has shown that where banks in Europe face limited competition, and firms depend on them, financing constraints for SMEs have been found to be higher.5 Such a rebalancing of the financing mix of the euro area economy probably requires further regulatory action to acknowledge the emergence of new, high-quality capital market instruments, such as simpler and more transparent ABSs.