Editing Capital market (section)

=== Capital market versus bank loans===
Normal [[bank lending]] is not usually classed as a capital market transaction, even when loans are extended for a period longer than a year. First, these bank loans are not [[Securitization|securitized]] (i.e. they are not packaged into a resaleable security like a share or bond that can be traded on the markets). Second, lending by banks is more heavily regulated than capital market lending. Third, bank depositors tend to be more risk-averse than capital market investors. These three differences all act to limit institutional lending as a source of finance. Two additional differences, this time favoring lending by banks, are that banks are more accessible for small and medium-sized companies, and that they have the ability to [[Money creation#Money creation through the fractional reserve system|create money as they lend]]. In the 20th century, most company finance apart from share issues was raised by bank loans. But since about 1980 there has been an ongoing trend for [[disintermediation]], where large and creditworthy companies have found they effectively have to pay out less interest if they borrow directly from capital markets rather than from banks. The tendency for companies to borrow from capital markets instead of banks has been especially strong in the United States. According to the ''[[Financial Times]]'', capital markets overtook bank lending as the leading source of long-term finance in 2009, which reflects the risk aversion and bank regulation due to the [[2008 financial crisis]].<ref>
{{cite news
|url= http://www.ft.com/cms/s/0/21925f04-a2d4-11de-ba74-00144feabdc0.html |archive-url=https://ghostarchive.org/archive/20221210/http://www.ft.com/cms/s/0/21925f04-a2d4-11de-ba74-00144feabdc0.html |archive-date=2022-12-10 |url-status=live
|title= Market Insight: Can the rally end the crisis?
|newspaper= [[The Financial Times]]
|author= Lena Komileva
|date = 2009-09-16
|access-date=2012-09-06
|url-access=subscription}}
</ref>

Compared to the United States, companies in the [[European Union]] have a greater reliance on bank lending for funding. Efforts to enable companies to raise more funding through capital markets are being coordinated through the EU's [[Capital Markets Union]] initiative.<ref>{{Cite news|url=https://www.politico.eu/article/eus-capital-markets-union-2-0-explained/|title=EU's capital markets union 2.0, explained|date=2017-06-08|work=POLITICO|access-date=2018-03-07|language=en-US}}</ref><ref>{{Cite web|url=https://ec.europa.eu/info/business-economy-euro/growth-and-investment/capital-markets-union/what-capital-markets-union_en|title=What is the capital markets union?|website=European Commission – European Commission|language=en|access-date=2018-03-07}}</ref><ref>{{Cite web|url=https://www.ft.com/stream/445ebffe-2704-479e-ae69-0ac0a34c3cd0 |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/stream/445ebffe-2704-479e-ae69-0ac0a34c3cd0 |archive-date=2022-12-10|title=EU Capital Markets Union|website=Financial Times|language=en-GB|access-date=2018-03-07|url-access=subscription}}</ref><ref>{{Cite news|url=http://www.cityam.com/284612/eu-commissioner-dombrovskis-kicks-off-fresh-row-over-citys|title=EU's Dombrovskis ignites fresh row over City's market access post-Brexit|last=White|first=Lucy|date=2018-04-24|access-date=2018-04-25|language=en|quote=Regarding Capital Markets Union, the European Commission's plan to improve access to non-bank financing across the EU, he said the "departure of the UK makes this project even more important and even more urgent. It will have to compensate for the EU's largest financial centre not being in the EU and not being in the single market any more"|archive-url=https://web.archive.org/web/20180424211509/http://www.cityam.com/284612/eu-commissioner-dombrovskis-kicks-off-fresh-row-over-citys|archive-date=2018-04-24|url-status=dead}}</ref>