Europe's bank-based financial system is not well-suited to finance risky startups. High-tech startups often develop new technologies and business models, which are risky and may be hard for banks to assess. These were the conclusions drawn by three researchers at the International Monetary Fund (IMF) Nathaniel Arnold, Guillaume Claveres, Jan Frie. They add that the value of startups often lies in their people, ideas, and other intangible capital, which is difficult to pledge as collateral for a bank loan. "Banks are also constrained by rules that (rightly) limit lending to risky firms without collateral-even fast-growing ones that are likely to make large profits later," they said. The researchers also concluded that the European Union (EU) has a productivity problem.