Banks, capital markets not rivals when looking to fund firm operations

TF1912UKARIMU

Capital markets play a very modest role in the financing of businesses, either by issuing bonds or by raising equity capital. PHOTO | SHUTTERSTOCK

An analysis carried out by Bank of International Settlements (BIS) economists showed that the depth of normal recessions in bank-oriented economies is less than in economies more based on capital markets.

But when recessions coincided with financial crises, they showed that the impact on gross domestic product was three times as severe for bank-oriented economies as it was for market-oriented ones.

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Note: The results are not exact but very close to the actual.