I had promised myself not to mention Credit Suisse this week but last Wednesday’s FT article was too interesting to ignore. The article concerns a request to investors in some of CS’s somewhat more sporty packages to destroy confidential information given to them to help them evaluate the underlying transaction. The object of this exercise is apparently to prevent the data getting into the wrong hands as it concerns the leased assets of the super rich such as Yachts and Private jets some of which belong to Russian Oligarchs who have now been sanctioned due to the Ukranian invasion. Poor old CS it never rains does it. I wrote several weeks ago that the best thing the banks could do is to come clean on the areas of their loan books that might not be as pure as the driven snow. Sunlight is often the best disinfectant. Not only that but honesty is always a great policy particularly when unwanted information leaks seem to be arriving fast and furiously at the doorstep. There is not too much information about the underlying credit package but the FT mentions that there is a first slice loss involved in this paper ,which, while small, is not insignificant. Lessons need to be learned before the public starts asking, yet again, do these banks really help anyone but the dodgy super rich?
I don’t usually source articles in the Home Economics section of the Times but this one caught my eye. The journalist concerned was doing some renovations on her house and obtained a £ 15k loan in four minutes without leaving her couch. The interest rate was 8% over four years but apparently no questions asked. Naturally this all happened using an app and is testament to the efficiency of 2022 banking technology. The writer opined that this type of lending should have regulatory limits placed upon it. She mentioned BNPL lender Klarna where it seems the must have it now crowd can get money interest free. Well there’s a first, believe it if you will. The fact is that 7.5% over base is an enormous interest spread and the reason is that credit losses are baked into the price. That way all those honest and hardworking borrowers that need to get their boiler changed or whatever all pay more than they need to because the technology is efficient but not optimum.
I decided to troll the web and see what was doing the rounds about credit. Nothing particularly interesting but as I was looking for something more specific in a real world situation I got to thinking about all those claims made by lending institutions, all those thousands of data points scrutinised by the whizz bang applications etc. etc. and the occasional bit of honesty from a seasoned punter. On top of that all the Flash Harry’s that knows a bloke that can get you what you want that seem to be everywhere throwing Power Point PDF’s at you. The situation I was looking at had really good things going for it. The technology actually works, has real value, good people to make it work, good technical skills, sound organisational structure, an ability to dig deep into difficult questions. The fact is that this borrower didn’t need a broker or to troll around thousands of providers . All it needed was to get in front of serious financial people who understand the basics soup to nuts and bobs your uncle. Getting finance is not difficult if you know what you’re doing and you are not looking in a sector where the teckies have changed the Credit art into a science. Lending is not a box ticking exercise, never has been, never will be. At least not when it’s done properly.
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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