It tracks how most markets have continued to improve towards normal levels (on these indicators at least). An interesting exception is markets for bank funding instruments in Europe, which have become subdued as commercial banks have de-levered and central bank operations have provided cheap medium-term funding in large scale. Perhaps the worst functioning is the market for CMBS which has still not really returned in the UK (in contrast to CLOs which have made a comeback this year). Chart 2 Market functioning “heat map” based on issuance and spreads data(a)(b) P R I M A R Y  Corporat e bonds Bank bonds, unsecured  RMBS  CMBS  S E C O N D A R Y  Corporat e bonds Bank bonds, unsecured  RMBS CMBS  United States United Kingdom Euro area United States United Kingdom Euro area United States United Kingdom Euro area United States United Kingdom Euro area United States United Kingdom Euro area United States United Kingdom Euro area United States United Kingdom Euro area United States Euro area  N  2007  08  Very loose  Loose  Normal  NN NNNNNNNNNNNNNNNNN NN N NN N N NNN N N N NNNNNNNNNNN N N N NN N N N N N NNNNNNNNNNN N N NNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN NNN NNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN N  09  10 T ight  11 Very t ight  12  13  No Issuance  Sources: Bloomberg, Dealogic, JP Morgan Chase & Co, Bank of America Merrill Lynch and Bank calculations.
Many of those assets remain impaired and are being run off or sold off where possible, negatively impacting banks’ lending figures. And given the losses suffered by most banks on these portfolios, there is a natural reluctance to increase lending to that sector again. One reason we’ve not yet seen a significant expansion in total lending is  10  BIS central bankers’ speeches  that banks have tightened their credit assessment criteria since the crisis and have not changed them following the launch of the FLS. Some borrowers will find that frustrating. But from the banks’ point of view it is a prudent thing to have done, so they don’t get back into the troubles they were in before. Chart 7 Net lending by FLS participants(a)  (a) Net flows of sterling lending to UK households and private non-financial corporations. Non-seasonally adjusted. (b)  The sum of net lending by those participants with positive net lending during the quarter. (c)  The sum of net lending by those participants with negative net lending during the quarter. When considering the corporate lending numbers, it is important to remember that many companies (particularly large firms) are making increased use of capital markets to raise finance. Bond issuance by UK businesses remained strong in 2013 Q2, following a Q1 figure which was the highest since 2009 Q2.