I was reading about the benefits and harms of securitisation. A research piece suggested "Reducing overreliance on the banking system" with 2 sub-points:
Corporates can access to the funding sources directly
Banks can distribute their existing risk and thus free up their balances to undertake more lending
I was wondering if the second point actually isn't valid if point 1 is true. Considering a closed system, when the corporates get funding from investors directly instead of banks, although the banks free up their balance sheet (on the demand side), investors also pull out money from the banks at the same time (supply side). In this sense, only point 1 is true (transfer of lending entity) where point 2 is not beneficial since there is actions in the supply side (provision of saving/deposit from investors).
Is my argument valid? Discussions welcomed.