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.
Are SME’s destroying value by not tapping the corporate bond market?