Corporate finance: Banks versus capital markets
Fecha: enero 2023
Marta Alberni, Ángel Berges and María Rodríguez
SEFO, Spanish and International Economic & Financial Outlook, V. 12 N.º 1 (January 2023)
It has long been assumed that corporate financing in Spain (and Europe) was overly reliant on bank lending to the detriment of the capital markets, in contrast to the US model, where corporates tapped the markets far more intensely. To that end, in 2015, the European Commission launched its Capital Markets Union (CMU) initiative with the clear aim of correcting that bias, prompting a significant number of Spanish and European companies to début as bond market issuers. Tension in the corporate bond market since the start of the inflationary spiral towards the end of last year has driven a sharp increase in secondary market rates, as well as a sharp contraction in primary market issuance, making it impossible for many of those companies to tap the markets, forcing them back to the bank channel they had previously abandoned. That has led to a rebound in lending volumes to large enterprises, which are taking advantage of the fact that although the banks have increased the interest rates they charge for those loans, the increase has been less intense than the spike in market funding costs. As an example, activity in the Spanish corporate bond market, which had been registering strong growth since the middle of the last decade, in terms of both issuance volume and number of issuers, totally collapsed in 2022, accompanied by a very sharp increase in average yields on that market to over 4%. That said, indeed, bank and market corporate finance are compliments, rather than substitutes, with the banks acting as a back-up option when the bond markets are temporarily unable to finance the productive apparatus. The banks’ role is all the more noteworthy considering the fact that they themselves have also seen their ability to issue affected by the bond market crisis.