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Alt Lending Week ended 19th August 2022

Is the City about to undergo a bloodbath of Dealmakers? 

An apocalyptic piece in the Sunday Telegraph citing the possibility of a large number of redundancies in the dealmaking sector.  Of course banks need to trim their cloth when the going gets tough. For some reason these guys are usually overpaid and judging by the outcomes not very good. One of the reasons for this as for so much else in the UK economy is the short termism employed by all industries including banking. Once the deal has been put to bed the banker can forget about it even if it turns out to be a s*** show. Who needs to produce real results when most of  your alary come from bonuses.  Old style bankers had to live with the legacy of their decisions. In the bond markets the underwriters are off the hook once the paper is sold. The banking business will not return to proper lending practices until it has to live with the longer  term risks.  

The impact of short termism on Productivity 

Excellent piece as usual by Roger Bootle. Among the subject he focuses on it the impact of incentives in influencing corporate performance. Lenders should also take notice of this malign trend to incentivize corporate actions which tend to be related to events which are near term rather that long term. An executive that will make a killing if the share price rises over a short term horizon may have little incentive to look beyond that point. Exactly the same point being made in the tale above. Mind you the banking business has always been a matter of luck. I was once in charge of a country loan portfolio that somewhat unexpectedly decided to go Socialist. I didn’t even vote in the election but the subsequent deterioration in credit quality that followed this turn of events was down to me to sort out. You’d have thought I caused it!  

Old Lady approves 50 year mortgages  

It is good to see that the Bank of England has approved this measure. It sets a benchmark for the long term and I can see no good reason why mortgages should not be transferable to younger generations. If it makes properties more affordable and certain in the short term then more power to it. The mortgage market UK has been out of fresh ideas for decades so more or less anything that stretches the envelope is welcome. Lenders have focused on short date property valuations for far too long. The trend in UK residential property prices is relentlessly upwards regardless of what happens in the rest of the economy. In one of the most overcrowded  countries in the world and in a situation where demand is continuously higher that supply, bankers should be more sanguine about the risks.  

                                               

 

 

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. Daily Fintech’s original insight is made available to you for US$143 a year (which equates to $2.75 per week). $2.75 buys you a coffee (maybe), or the cost of a week’s subscripti on to the global Fintech blog – caffeine for the mind that could be worth $ millions.

 

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