As more details on the EU banking supervision plans emerged at the EU leaders summit last week, it is becoming clearer that the EU is banking on the ESM to finance the transition out of the Eurocrisis. Is this realistic? We believe not. In this Market Insight we put forward the risks of the current ESM set up and our ideas as to how the ESM could increase its firepower without overburdening the EU countries’ sovereign debt ratings. Structured Finance can help!
Since the beginning of the global financial crisis in 2007, many European corporates have first- hand experience of banks tightening their lending criteria, and thereby making it more difficult for corporates to access banking credit. This holds true for large corporates but especially for small, medium-sized and smaller large corporates. It is therefore no surprise that small and mid-cap enterprises say that raising debt financing is one of their two most pressing problems. Against this backdrop, we expect the European banking market to become more disintermediat- ed, as corporates will be looking to by-pass banks and tap the debt capital markets directly. Large corporates have been doing this for years and, as we argue in this paper, we expect their smaller peers to follow this example. Initiatives taken by stock exchanges across Europe to promote the issuance of corporate bonds and to make it easier for small and mid-cap corporates to access capital markets strengthen our belief.
Market Insight 18-04-2012 Are SME’s destroying value by not tapping the corporate bond market?
After a tumultuous second half of 2011 in the financial markets, on the face of it, 2012 does not appear to hold much to cheer about, particularly in Europe. What will happen to the Euro? Where will the next sovereign downgrade occur? How much more equity do European banks need in order to restore confidence? There are no quick fixes to this uncertainty. However, as Benjamin Disraeli once said “there is no education like adversity”. In this Market Insight we ask what we can learn from these very volatile markets and where the bright spots might be in 2012.