Market liquidity has a big impact on bank lending in the euro area. When market liquidity is high, banks lend more money and charge lower interest rates. But during financial crises, lending decreases and interest rates go up. A drop in market liquidity hurts bank lending more than an increase helps it. This is especially true for corporate loans. Banks that are not listed, less profitable, rely more on interest income, and have less funding are most affected by market liquidity. To keep the economy running smoothly, it's crucial to have well-functioning and liquid markets. This is important as the EU plans to create a capital markets union and the UK might leave the EU.