Given the structure of savings in the euro zone, it is a bad idea to weaken banks' financing of the economy

Euro-zone households have a strong preference, which is unchanged, for liquid, risk-free savings (financial assets). It is therefore necessary to intermediate their savings to lend to the economy; banks carry out this intermediation by which liqui d savings is transformed into credit. Current policy aims to reduce the weight of euro-zone banks in financing the economy, mainly due to the new banking regulations. This is a bad idea if intermediation between liquid, risk-free savings and credit remains necessary.