Yet, despite a reduction of the overnight interest rate to levels close to zero, banks in a large fraction of the euro area economy had not been reducing their lending rates at the same pace and, in some countries, in fact they had tightened credit conditions dramatically. The stimulus was not moving downstream to reach the real economy.
The capital market works as a link between those that have unused surplus savings and end-users who are in search of funds to support their operations. While a capital market enables the channeling of funds among different parties for varying reasons, it is important to emphasize that those funds are directed to critical and responsible use.