IMF Working Papers

Natural Bank Reliance

By Hannah L Winterberg

June 13, 2025

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Format: Chicago

Hannah L Winterberg. "Natural Bank Reliance", IMF Working Papers 2025, 115 (2025), accessed July 19, 2025, https://doi.org/10.5089/9798229013482.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The higher aggregate prevalence of loan over bond funding in Europe is not only driven by the well-documented differences in financial market settings but also strongly shaped by different firm characteristics. The European economy is more fragmented than the U.S. economy, and thus features a different firm distribution in terms of size and collateral availability. I estimate that if all European firms had access to a financial market like the U.S. market, their aggregate bond funding share would remain significantly smaller. This counterfactual suggests a limited potential for European corporate bond markets in the short and medium term.

Subject: Bank credit, Bonds, Corporate bonds, Financial institutions, Financial markets, Money, Securities, Securities markets

Keywords: Aggregate prevalence, Bank credit, Bank funding, Bank reliance, Bond funding share, Bond investor, Bond share, Bonds, Corporate bond bond market, Corporate bond markets, Corporate bonds, Euro area., Europe, Financial market setting, Firm size distribution, Securities, Securities markets

Publication Details

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