European companies therefore need loans that are less secured, but also, for business start-ups and growing businesses, more equity capital. Indeed, equity capital has two advantages: it gives the entrepreneur access to long-term funds while also offering investors strong upside potential to reward the risk incurred. A catching-up economy – like Europe until the 1980s, and many emerging countries today – can finance its growth through debt. An economy at the technological frontier, which carries greater risk, must rely more on equity financing. However, in the euro area, companies’ financing structure remains predominantly based on debt rather than equity. By comparison, the net equity of non-financial corporations represents 123% of GDP in the United States, against 52% in the euro area. This transatlantic divide, which is hardly ever mentioned, is even larger than the gap in rates of debt disintermediation: the well-known figure of 20% of capital market financing in Europe compared with 75% in the United States. b) With regard to debt, France’s situation currently appears on the whole satisfactory. Bank financing remains easily accessible. Indeed, in terms of volume, outstanding bank loans to businesses are rising at a faster pace in France than anywhere else in Europe, posting growth of 4.5% year-on-year at end-November 2015, compared with +2.1% in the United Kingdom, +1.0% in Germany, 0.0% in Italy and an average of +0.9% for the euro area.
But it is a vital part of that transformation, and I am pleased that this conference is giving it the consideration it deserves. Thank you for your attention. 1  4  P. Asdrubali, B. E. Sorensen and O. Yosha, “Channels of interstate risk sharing: United States 1963–1990”, Quarterly Journal of Economics, vol. 111, 1996, Oxford University Press. BIS central bankers’ speeches