Risks and Challenges of Corporate Financing by Banks

Abstract

The issue of corporate financing by banks faces multifaceted challenges, including credit, market, and liquidity risks, as well as operational and regulatory obstacles. These challenges reduce banks’ ability to lend effectively, consequently limiting firms’ access to financial resources. The root cause of this problem lies in constraints arising from stringent regulations, lack of transparency in financial information, and misalignment with the innovative needs of enterprises. Legal restrictions imposed after financial crises have led banks to adopt a more cautious approach to financing, which is particularly challenging for small and medium-sized enterprises (SMEs) that are more dependent on bank resources. The primary solution to address these issues is to strengthen risk management systems in banks, update banking regulations, and create supportive mechanisms for enterprises. Greater transparency in financial information, the use of innovative financial instruments, and diversification of funding sources can also be effective measures. Implementing these solutions requires close cooperation between banks and enterprises, reform of supervisory policies, and the adoption of modern technologies for risk analysis. Improving the transparency of financial information through the creation of shared platforms can facilitate the lending process and reduce credit risks. Ultimately, these measures contribute to sustainable corporate financing and enhance economic growth.