Alt Lending week ended 12 March 2021

 

European Banking regulator hit by Chinese hack of Microsoft email

So the gamekeeper has been poached. Reading this I had to laugh after all banking regulator is quick to chide if bank’s applications are found to be wanting. In fact this serves as a reminder to the banking sector, the regulators and the Fintech security boys and girls that acquiring clients is not all that matters in the banking sector and that opportunities to make money from cost saving activities are still out there. Microsoft somewhat piously pointed out that applying the latest patches to their applications as quickly as possible would help. Well of course it would but in the real world banks have to struggle with tens of thousands of interconnected applications though umpteen communications protocols from new applications to legacy systems. Banks were among the first institutions to automate and they have paid the penalty for it ever since. Nevertheless reducing the number of successful attacks is a very important way of reducing costs, reputational damage and improving the P&L account

Starling Bank is Britain’s newest unicorn funding drive

Good news for the newcomers and at least Starling is in the black – just –  and forecasting its first full year’s profits. The valuations put on tech firms and particularly digital banks look top heavy to me for a number of reasons. These include a crowded sector, rock bottom interest rates and a completely unpredictable market with largely unquantifiable risks. In addition a strategic acquisition plan into unknown jurisdictions past covid looks like a stretch for its management. Nevertheless the undoubted bubble looks like it might have some time to run yet. If a company delivering burgers to your door can be worth £1.5 billion when there is no barrier to entry then a sound profitable bank providing quality service looks like a different proposition. Starling are also taking on line security seriously. Perhaps they should talk to the European regulator.

The strange case of Greensill Capital

The past few days have provided plenty of news about Greensill Capital which collapsed into administration on March 8th. On the face of it Greensill is so called supply chain lender.  To oldies like me supply chain lending is invoice discounting or something similar by another description. The concentration in interest in the UK centres around the fact that Greensill was providing working capital to GFG Alliance a global steel and metals empire run by Sanjeev Gupta. GFG who were Greensill’s biggest client also owns Empire Steel one of the largest steelmakers in the UK. Apparently Greensill have an exposure to GFG of some £ 3.5 billion.  Greensill is to all intents and purposes is a bank. However it lends only to businesses and is therefore not regulated by the FCA. The usual suspects are now trying to wipe their fingerprints of anything to do with Greensill including ex Prime Minister David Cameron who is an adviser to Greensill. There is a house of cards around this. Greensill was being bankrolled by Swiss giant Credit Suisse who were packaging up GFG debt and selling it to the wider banking market. They have now pulled the plug. In any case it doesn’t feel quite right. Expect some fireworks in the next couple of weeks.

 

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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