Definition for : Bank-based economy

In a bank-based economy, the capital Market is underdeveloped and only a small portion of corporate financing needs are met through the issuance of securities. Bank financing predominates. Companies borrow heavily from banks, whose Refinancing needs are in turn covered by the central bank. A bank-based economy is also called a Credit-based economy.

(See Chapter 15 The financial markets of the Vernimmen)

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