IMPORTANCE OF COMMERCIAL BANKS IN PROMOTING CAPITAL MARKET DEVELOPMENT
Abstract
This paper explores the critical role that commercial banks play in the development and deepening of capital markets, particularly in both emerging and developed economies. Capital markets are essential mechanisms for mobilizing long-term funds, fostering investment, and supporting sustainable economic growth. While traditionally perceived as institutions focused on deposit-taking and lending, commercial banks have increasingly expanded their functions to include underwriting of securities, management of investment portfolios, and facilitation of financial intermediation between investors and issuers.
By utilizing a mixed-method approach that includes empirical data analysis, cross-country comparisons, and trend evaluations from 2015 to 2022, this study reveals a robust positive correlation between the scale and efficiency of the banking sector and key indicators of capital market development. These indicators include market capitalization, the number of initial public offerings (IPOs), and the issuance of corporate bonds. Countries with well-capitalized and diversified banking systems demonstrate stronger capital market activity, higher investor confidence, and more stable access to financing for the private sector.
Furthermore, the study identifies how policy frameworks, technological innovations, and institutional capacities of commercial banks influence their effectiveness in supporting capital markets. The findings provide important implications for financial regulators, policymakers, and development strategists who seek to strengthen financial ecosystems by promoting closer integration between banking institutions and capital market infrastructure.
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