Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/149465
Authors: 
Franke, Günter
Krahnen, Jan Pieter
Year of Publication: 
2017
Series/Report no.: 
White Paper Series 44
Abstract: 
The Capital Markets Union-project of the European Commission aims for an increase of market-based debt financing of small and medium-sized enterprises (SMEs), complementing bank lending. In this essay we argue that rather than focussing on pure non-bank lending, a reasonable mix of bank- and market-based financing should be considered. Banks are said to have a comparative advantage in critical lending functions such as credit screening, debtor monitoring and debt renegotiation. All forms of lending require a persistent skin-in-the-game of critical players in order to be effective. The regulator should insist on full disclosure of skin-in-the-game, thereby improving capital allocation and reducing systemic risks.
Subjects: 
SME
funding
capital markets
lending instruments
banks
Document Type: 
Working Paper

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