Pension funds, widows and orphans have been told to keep out of what’s perceived safe, that’s now the banks’ domain

Bank regulators, with their credit-risk-weighted capital requirements, allow banks to leverage their equity and the support received by deposit guarantees and similar, immensely, as long as they stick to lending to “The Safe”... in their mind the infallible sovereigns, the AAArisktocracy and housing.

Consequentially the more regulators favor and therefore subsidize bank lending to “The Safe”, the lower will be the interest rates paid by “The Safe”... sometimes even down to zero interests, and, of course, in relative terms the higher the rates “The Risky” need to pay. 

Ergo… non-banks who have to evaluate the increased spreads between The Safe and The Risky, without counting with the regulatory bank-subsidies, are more tempted by, or are in more need of the higher rates paid by The Risky.

Pension funds, widows and orphans who were the one investing in “The Safe”, have now been told to get out of there… “That’s for the banks!”

"The Risky", like the SMEs and the entrepreneurs they used to have access to the banks… now they are left out in the cold… desperately looking for some crowd-funding.