This gradual increase in business financing on the capital markets by means of the issuance of fixed-income securities is due to a series of factors, some transitory and others more structural in nature. Notable among the transitory factors common to all Euro area countries was the introduction in 2016 of the Eurosystem’s Corporate Sector Purchase Programme, which is part of the Asset Purchase Programme. This programme has contributed to boosting corporate funding through fixed-income issues, by reducing their cost relative to bank financing. In any event, analyses by Banco de España economists show that this programme also contributed indirectly to improving the access by SMEs to bank funding. This was because banks allocated a high proportion of resources freed up by the repayment of loans by securities-issuing firms to funding smaller-sized firms without access to the securities markets. Following the end of net asset purchases, since early 2019 the Eurosystem’s Asset Purchase Programme has remained active by reinvesting the amounts maturing on the securities purchased. It is thus expected that this programme will continue to be conducive to the issuance of corporate debt. Among the more permanent factors behind the rise in capital markets in Europe are, firstly, the new international banking regulations in response to the crisis. True, the new regulatory requirements to improve banks’ resilience to adverse shocks contribute to strengthening financial stability. But they might also hamper banks’ ability to compete in the intermediation of some financial flows. 3/7  Secondly, the influence of the alternative fixed-income and equity markets is worth highlighting.

In response to this more competitive and challenging environment, banks could adopt various strategies such as greater income diversification, the containment of operating costs and increased investment in technology. From the regulatory standpoint, the main challenge will involve maintaining a level playing field for all financial system participants, so that similar activities posing similar are subject to a comparable level of regulation. As the supervisor of banks and guarantor of financial stability, the Banco de España also faces very important and specific challenges as a result of disintermediation. In this new environment, the relative importance of the main risks to financial stability will foreseeably change with an increase of those linked to market risk. As a result, the supervision and analysis of the financial risks arising outside the banking system and of the interconnections between banks and other financial system participants will become more important. These interrelations will not only take the form of cross-balance sheet or income statement positions; similarities between the portfolios of different types of participants may also mean that shocks initially affecting one institution or a group of institutions may ultimately have repercussions for all other financial market participants. In this respect, it should be borne in mind that the Banco de España is responsible for activating and deactivating certain macroprudential tools introduced under legislation to mitigate systemic risk in the financial sector. Most of these instruments are applied almost exclusively to banks.