8 A key factor driving the improvement in secondary-market liquidity is the expanded participation of nonbank institutional investors. These investors are active managers of credit risk, and consequently they appear to place a higher value on liquidity. Along with liquidity, transparency in credit markets has also improved over time.
During the 16th century, the role of banks became more important as Europe evolved from decentralized feudalism to a more centralized system of a few dominant nation-states (Calomiris and Haber 2014). But banks were not only important ﬁnanciers, they also helped the sovereign placing its debt on the market.