European companies have cut the share of funding derived from alternative sources as the European Central Bank’s quantitative easing boosts bank liquidity, Allen & Overy said.
Alternative forms of finance, such as private placements and non-bank lending, only account for 30 percent of funding at companies in major European markets, down from 40 percent a year earlier, the law firm said, citing a YouGov Plc survey it commissioned. Borrowings from banks climbed to 48 percent from 44 percent, and funding from capital markets increased to 22 percent from 16 percent.
Banks have more funds to lend as the Frankfurt-based ECB is buying 60 billion euros a month of public and private-sector debt to boost lackluster inflation in the region. That’s cooled the growth of alternative-finance providers, which took off amid tighter regulations on traditional lenders following the financial crisis.
“Numbers are skewed by the amount of money the European Central Bank has been pushing into the market through its asset-purchase program,” said Philip Smith, a partner at Allen & Overy in London. “Banks found themselves in a position to lend more freely than previously anticipated.”
Still, many alternative-finance investors expect future growth, particularly in lending to medium-sized companies, the survey showed. That may ease access to capital for businesses, including ones that haven’t previously sold bonds, Smith said.