The 2018 reforms introduced in order to make it easier for customers to switch bank account providers don’t seem to have pleased anybody. As if to highlight yet another initiative which does not do what it says on the tin the major banks say it has massively increased their costs while newcomers like Monzo that the open banking reforms have failed to help. Not terribly surprising though. Opening a bank account ought to be the easiest thing in the world in Western Europe but that’s not how it has worked out and in view of the more or less absolute necessity for everyone to have one; a total scandal. The problem seems to be firstly over zealous regulation and secondly banks own policies. Banking should be a relationship business however it has become largely productised and I cannot help but think that client retention come quite low in major banks priorities. Despite KYC banks these days simply do not know their customers at all. They only have themselves to blame. I would be happy to expand but I would need to write a book.
It is amazing to me that headlines like this appear so regularly in the Uk’s national newspapers. UK financial institutions have largely given up on equivalence and rightly so. Why? Its relevance is diminishing by the day. Deutsche is a (basket case) in point. It has failed in its core business and is now retreating to an even more hostile environment within Germany. An ex colleague of mine tells me that for every banking job moving to the EU a somewhat larger number are in fact coming in the other direction. The City has what the continent doesn’t and the world is a big place. As if to emphasize the point, Switzerland has the second most important financial centre in Zurich and the EU – Swiss negotiations on a wide ranging Framework agreement drafted two years ago, is today on the point of collapse.
While Amigo is a very small fish in the overall scheme of things it contains a salutary lesson for all those in the Fintech space whose businesses are subject to the whims of regulators. Amigo’s model was only relevant to those borrowers who could not access traditional credit markets. The general idea is, or rather was, that you can obtain a loan if you have a creditworthy guarantor. Amigo’s attempt to put together a restructuring has been disallowed by the high court on the basis that compensation for borrowers that were missold unaffordable loans, and there are over a million of them, were unfairly capped. Over 95% of creditors who voted to approve the proposed arrangements were overruled by the judges’ decision. A key factor in the decision may well have been that the Financial Conduct Authority made a last minute intervention which was ostensibly for the benefit of creditors proposing that a fairer deal might be possible. They opined that the creditors did not have the “information or experience to appreciate the alternative options reasonably available to them”. To be fair that might be the case, but on the other hand it might not. At the end of the day this was a subjective decision made against the wishes of the 95% of the voting creditors. If those creditors get less than that proposed under the arrangement or nothing at all I would think that they will be less than impressed with both the judge and the FCA. Nobody is coming out of this well so far.
Howard Tolman is a well-known banker, technologist and entrepreneur in London,
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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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