A deep market is a network of different risk appetites.
Monday’s post showed something interesting: Swiss SME lending has expanded substantially, while an increasing share of utilised credit has become secured.
That raises a broader question: what actually makes a capital market deep?
Capital alone is not enough.
A deep market is a network of heterogeneous risk capital.
Banks, insurers, pension funds, private credit, family offices, equity investors and specialist funds have different liabilities, time horizons, expertise and return requirements.
Those differences matter because they allow the same underlying risk to be evaluated differently.
One institution may lend against collateral. Another may underwrite cash flows. Another may accept subordination for a higher return. Another may provide equity or acquire an existing position at a discount.
This does not mean every risk should be financed.
It means that a functioning market can offer different structures, different prices and different potential owners for different dimensions of risk.
That is depth.
And it may help explain why some of the evidence emerging from Switzerland deserves attention.
SECO Economic Cooperation and Development has identified gaps in substantial corporate lending, syndicated and complex financing. Swiss participation falls sharply as scale-up rounds become larger.
Below the largest listed companies, research coverage and liquidity become increasingly difficult to sustain.
These are different markets. They do not establish a common cause.
But they raise an important hypothesis:
What if the issue is not only insufficient capital in particular segments, but insufficient diversity in the mechanisms available to carry risk?
A financial system can contain many institutions and enormous balance sheets while still becoming shallow if different actors increasingly concentrate around similar types of acceptable risk.
Market depth therefore has another dimension:
Not only how much capital exists, but how many genuinely different ways the system can understand, price and carry risk.
That is the dimension I think Switzerland needs to examine and rethink without delay.