At a micro level, the CMU can complement the banking sector in fostering innovation while also strengthening firms’ financial structures. Research has long documented the fact that, among external sources, equity financing is best suited to foster innovative activities, for a number of familiar reasons.
A second proposal to reduce the likelihood of bank failures was put forward by the German Council of Economic Experts, and similar proposals have been made by others. The proposal features a European Stabilisation Fund. The thinking behind this might initially seem to be not too different from the underlying concept of Basel II.