Universal banking and the development of secondary corporate debt markets: Lessons from 1830s Belgium
- Author:
- Stefano Ugolini
- Series:
- Working Paper
- Number:
- 21/2010
Abstract:
This paper proposes a reassessment of the old-age debate on universal banking and growth by putting it on a different plan. Modern financial economics are used to provide new theoretical foundations to Gerschenkron’s (1962) hypothesis: universality is interpreted as a strategy for banks to reach the critical size needed in order to perform successful securitization of corporate debt. A relevant natural experiment in universal banking and industrialization (Belgium in the 1830s) illustrates the argument. The conclusion is that creating a new financial market also implies establishing intermediaries to supply crucial functions such as underwriting, certification, and liquidity provision.
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