Abstract
ABSTRACT Recent developments in the literature on financial architecture suggest that banks and markets not only coexist, but also coevolve in ways that are non-neutral from the viewpoint of optimality. This article aims to analyse the concrete mechanisms of this coevolution by focussing on a very relevant case study: Belgium (the first Continental country to industrialise) at the time of the very first emergence of a modern financial system (the 1830s). The article shows that intermediaries played a crucial role in developing secondary securities markets (as banks acted as securitisers), but market conditions also had a strong feedback on banks’ balance sheets and activities (as banks also acted as market-makers for the securities they had issued). The findings suggest that not only structural, but also cyclical factors can be important determinants of changes in financial architecture.
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