Recent studies propose that banks and capital markets not only compete for servicing a limited pool of investment projects but also co-operate.
Complementarities between banks and capital markets are becoming more and more apparent, broadening the set of financing sources the ultimate borrower can choose from.4 There are many areas where markets and banks offer complementary information and funding services, among them: (i) issuance of bonds, where banks provide a number of advisory and administrative services for the issuer; (ii) securitisation, where banks focus on credit analysis and markets focus on financing; and (iii) bank capital, where capital markets reduce the financing friction by lowering banks’ cost of equity, and enable banks to raise additional equity to expand their lending scope.