Essentially, what we are aiming for is a more balanced financing mix where firms have a greater ability to substitute bank and market finance, and hence intermediation becomes more contestable and resilient. I would however emphasise that balance is key; we should not view market finance as a cure-all.
Indeed, there is some research to suggest that too much substitution towards market finance may lead to less total borrowing, as firms that replace bank loans with bond issuance internalise the fact that this type of borrowing will be harder to restructure in bad times.8 Besides, Europe does not have a set of institutions consistent with a fully market-based allocation of savings, such as funded pension schemes.