There was a small, but potentially significant article by Simon Dukes in the Sunday Times. In it, he highlights that the Big Four banks will be ordered to further increase their capital ratios to protect against the ravages of another financial crisis.
The Financial Policy Committee of the Bank of England (FPC) is expected to increase the equity requirement on the banks' loan books from 3% to somewhere between 4% - 5% to provide a further buffer against future losses. What at first glance appears to be a 1% - 2% increase, is, of course, a 50% increase and could have a significant dampening effect on the banks' ability to lend to businesses and households.
At a time when the Big Four banks are already under scrutiny for their lack of support for Britain's SMEs - the Q2 Funding for Lending Scheme figures released in August showed a £0.4bn quarter-on-quarter reduction - it seems reasonable to question the timing of the decision. The banks surely won't consider it helpful to their cause.
With a late payment culture remaining endemic and many SMEs wanting to release themselves from the shackles of the recession and exploit the expansion and job creation opportunities that they now see before them, another brake on the availability of mainstream credit seems curiously timed.
Unless, of course, it is another nod towards the alternative finance industry and a subtle stimulus to the increased competition that regulators have publicly declared they want to see in the sector.
Peer-to-peer lenders need 100% liquidity for the loans they advance and, with lenders matched to individual borrowers in most instances, losses, when they occur, do not threaten millions of depositors who have no say in how their money is being used and leveraged.
The alternative finance and FinTech industries have never had a more auspicious climate in which to advance their businesses. Many have been, and remain, heads down in the development of their platforms and technologies. Now is the time for the tinkering to stop and for them to focus their seed funding on rapid commercialisation. This means deploying relentless marketing and sales strategies that will not only revolutionise their businesses, but an industry too.
by Neil Edwards, 6 minute read
by Neil Edwards, 4 minute read