A recent Banco de España’s research paper documents that this programme also had a positive side effect on the access of SMEs to funding given that banks reallocated the credit previously granted to bond issuers to smaller firms that do not have access to financial markets.7 Among the more permanent factors that could have contributed to the recent trend of financial disintermediation is the introduction of the new global banking regulation as a reaction to the financial crisis. The new regulation aims to improve primarily the resilience of banks to shocks and will have a positive impact on overall financial stability. However, as it has been documented in some papers, these regulatory measures might also reduce somewhat the ability of banks to compete in the intermediation of some financial flows8. But going forward, it is still under debate at the global level to what extent elements of the new regulatory framework should be also applicable to some non bank financing channels, as long as they might share with banking activities similar underlying risks to financial stability, such as maturity transformation and high leverage. If finally applicable, this might imply a more level playing field between banking and non bank intermediation. Another permanent factor that is contributing to the development of capital markets in the EU is the launch of new markets such as the alternative stock and fixed-income markets aimed at attracting medium-sized companies, although the size of these markets is still relatively small.
Apart from the aforementioned implications in terms of the low diversification of firms’ financing sources, this situation has also implications for the ability of households and firms to hedge against country-specific sources of risk to smooth income, consumption or investment growth. The evidence for United States shows that cross-ownership of assets all over the country, and especially equity securities, has played a key role in smoothing state-specific shocks6. By contrast, this mechanism is less powerful in Europe since the cross-border ownership of assets is still limited. The project of the Capital Markets Union (CMU) aims at the developing and integration of capital markets in Europe. In my view, the CMU project is an important step forward to reach the goal of correcting some structural deficiencies of the EU capital markets in terms of their relative underdevelopment and fragmentation. CMU Action Plan was launched in 2015 by the European Commission by setting out a list of over 30 actions and related measures to establish the building blocks of an integrated capital market in the European Union by 2019. So far the implementation of these measures has been slow. In any event, in recent years the role of European capital markets as a source of funding for firms has increased. For example, the ratio of financing through fixed-income securities to total debt financing has grown from 8% in 2007 to 12 % in 2017. A similar trend has also been observed in other advanced economies including the United States.