The figures are clear: the share of bank financing for companies in the Eurozone has fallen from 70% between 2002/2008 to 50% between 2002/2016. However, with first-quarter data, this percentage may already be 36%. The rest of the corporate financing in the area during this period has relied on a combination of direct debt issuance, inter-company loans, and non-bank financing (shadow banking).
Naturally, diversification of corporate financing sources is always desirable. And the ECB’s efforts to improve the transmission of monetary expansion to the economy, through unbeatable financial conditions in the markets, are more than justifiable. Beyond almost zero official interest rates (and negative in the case of banks’ excess deposits), we are talking about the ECB’s direct purchase of assets in the market, including corporate debt. It is undeniable that this latter decision, adopted in March, has strongly contributed both to the increase in corporate paper issuance and to the fall in financing costs and risk premiums. In both cases, to minimum levels in recent history.
But to what extent can we speak of a structural change in corporate financing? To adequately answer this question, we will need to understand the how and why of the change.
