Alt Lending week Ending 4th December 2020

Italy overwhelming Debt gives it the whip hand

The astute Matthew Lynn points out that Italy’s debt situation is putting the whole of the Eurozone in a rather invidious position. The ECB has picked up the lion’s share of Italy’s debt issues over the past year and according to Matthew is now asking the creditor nations to either forgive the debt or to prolong the maturities indefinitely. Full marks for Chuszpah I suppose but he has a serious point. The Italian economy is the victim of a number of conflated issues brought about largely as a result of monetary union and the debt is so large that it has become perpetual. In addition the economy is largely wrecked so the likelihood is that the deficit will continue to grow. The other principal creditors of this money is the Italian banking system and other Eurozone banks. So the alternatives outline here are probably the only game in town. Either the ECB takes this debt on to its own balance sheet or just doesn’t repay it. Any attempts to recoup it is likely to crash the eurozone banking system. Covid politics also comes into this. Could the great and the good Northern Europeans kick poor old Italy in the teeth when it needs all the resources it can get to fight the pandemic? Sometimes the EU doesn’t seem like a club that one should belong to.

Monzo System Glitch

This article which focuses on the outage for some of Monzo’s systems reminds focuses on what must be every Fintech’s worst nightmare. As a digital player: what happens if my technology fails? In this case the systems went down at 7.45 am London Time but were up and running again some three hours later at 11.00am. Not too bad you might say and in the overall scheme things that is probably true but but if you are totally reliant on Monzo acting on digital instructions during that time slot then you might have had a lot of stress. The wider issue of course is failover in general. I remember visiting Microsofts cloud facility just outside Dublin the best part of ten years ago. The tour guide told us they had three independent grid power sources together with two huge industrial marine diesels powerful enough to run the centre and if that failed two independent sets of batteries that could last up to 24 I believe. Probably by now they have made it even safer. But you can’t help thinking about the what ifs. In this case it looks like a software or integration failure of some kind and not too much damage done but if you need some warm body to vouch for you in a crisis then waiting in an never ending telephone queue for a response is not the answer. Something for the digital players to think about.


Cerberus Wolf in Sheep’s Clothing or Man’s Best Friend

Up until a week or so ago I had never heard of private equity giant Cerberus but it appears to be bit of a strange beast. This article takes a close look at some of its activities over the past few years. In the states it shuns publicity but in Europe it has been involved in quite a few controversial situations over the past few years. Lucy Burton writing in London’s Daily Telegraph takes the lid off some of them. They include deals in Ireland, France and Germany. Now it is looking at the “ethical” Co-operative Bank which has been struggling for the past seven years. Cerberus seems to have penchant for lending businesses and has encountered some rough seas in which to sail. The latest controversy has shone a light on behavioural changes when the bets they take don’t work out when they can be “assertive”. Mind you Co-op needs all the help they can get. Cerberus could be the only game in town to take it on? As they say. Any port in a storm.

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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