While this is not strictly anything to do with lending it is certainly relevant to the fact that political interferences since Brexit have refused to go away. The clearing of financial transactions including some hideously complex financial derivatives has been a bone of contention ever since the split. For now Brussels has decided that European Banks can carry on using the services of London based clearing houses past an initial deadline of June 2022 because they are concerned about market disruption. So far so good but UK houses are concerned that this will not go away and should be made permanent. The uncertainty around this is causing the business to drip feed away from the UK. So is this what Brussels wants. A six hour time difference rather that just one. There is money in plumbing but that is just a function of the pure number of deals. It is a low value technically heavy business. The big advantage to European Banks is that they are used to UK law and know that it works effectively. However if the UK got its act together and deviated from some of the Brussels legalese including the dreaded GDPR then that might set the cat amongst the European pigeons.
Given the way the world works these days this is perhaps not a surprising development. So called “ethical investors” are apparently reluctant to invest in collateralised loan obligations(CLO’s a form of leveraged lending) in sectors such as hydrocarbon extraction, weapons and armaments manufacturing and even tobacco companies. It is of course down to investors to buy the risks that they want to take but it is not clear to me how this helps anybody. Obviously if you reduce the supply of money available for so called non ESG credits then the price will climb. Take defence companies therefore. Governments of the west have to pay for defence and they buy ordnance and other things like submarines and missiles to allow us to defend ourselves. Making them more expensive is not helping us. It is just another way of ensuring that our tax bills get larger while virtue signalling.
The above mentioned article appeared in the Guardian last month opining that the days of cheap mortgages are over. Yet in today’s’ Daily Telegraph we are told that the first signs of a mortgage war are appearing with deals targeting younger borrowers with low initial fixed rates are emerging. This demonstrates quite clearly that there are more factors affecting this market than just the base cost of funds. One of them of course is the fixed cost of client acquisition. All those mortgage advisors and their desks and mobile phones have to be paid for and the best way of ensuring that in the long term is to ensure you have a client base, at least so the story goes. I am not so sure. Borrowers these days are very savvy and not very loyal. They will churn their own grandmother for a miserly 1/8th% .
Howard Tolman is a well-known banker, technologist and entrepreneur in London,We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.For context on Alt Lending please read the Interview with Howard Tolman about the future of Alt Lending and read articles tagged Alt Lending in our archives.
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