For all of these reasons, policymakers look favourably at the development of market-based financing and the growth of institutional investors. It must be stressed, however, that banks and market-based finance remain complementary, rather than substituting one another, and that a level playing field should be ensured for all financial intermediaries.
If regulatory changes put banks at a disadvantage, firms may end up having difficulties accessing both bank and non-bank forms of external finance. Indeed, apart from remaining a vital source of corporate funding, especially for SMEs, banks are uniquely equipped to help firms to access the capital market.