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| Author: | Song, F. Thakor, A.V. |
| Title: | Financial system architecture and the co-evolution of banks and capital markets |
| Journal: | Economic Journal
2010 : SEP, VOL. 120:547, p. 1021-1055 |
| Index terms: | banks capital markets assets financing growth |
| Language: | eng |
| Abstract: | This study examines financial system architecture evolution (henceforth as: evl-n). It is shown that banks and markets show three forms of interaction: i. competition, ii. complementarity and iii. co-evl-n. Co-evl-n is produced by two elements, that is, securitization and bank equity capital. With banks evolving via improvements in credit screening, they securitize higher quality credits which encourages greater investor participation, spurring capital market evl-n. Bank evl-n. is stimulated as banks consequently serve previously unserved high-risk borrowers etc. |
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