The need to have banks capable of providing companies with liquidity

At the beginning of the COVID crisis, companies were seeking to increase their cash reserves and were drawing on the credit lines they had with banks. This mechanism is very stabilising at the start of a recession, but this is possible only if banks have the capacity to increase lending significantly at that time : they must have large surplus reserves, a good capacity to obtain funding at the central bank, and substantial capital. If these conditions are met, banks have a very stabilising role, which the financial markets cannot play.