BlackRock chief executive Larry Fink has said that economic growth in Europe has been “locked up” since the financial crisis because the trading block’s capital markets are underdeveloped.
Fink told Frankfurt’s Deutsche Börse that the economy had been held back by “excessive reliance” on banks and insurers for investment.
Issues with accessing bond and equity markets had “stifled economic recovery,” Fink argued.
“In the years since the crisis, much of Europe’s economic potential has been locked up. Strengthening capital markets and retirement systems can help unlock that potential, and doing so will be vital to Europe’s economic future,” the Financial Times quotes Fink as saying.
Bank lending accounts for around 70 per cent of funding to European companies, while Fink said that varying insolvency laws across the EU made bond markets more complicated.
He said: “The lack of a unified European corporate bond market raises costs for companies, deters investors and holds down liquidity.”
However, Fink warned against stifling the ability of insurers to lend too soon before capital markets had matured through regulations such as Solvency II.
“While a long-term objective is greater funding from capital markets, limiting insurance companies’ capacity for investment before capital markets are fully developed could significantly damage growth.”