Regulatory

FCA Blessings

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A lot happened over the past two weeks to strongly suggest a continued robust growth of the alternative lending industry, giving us a perfect reason to create a newsletter for a wider audience beyond our close network and investors.

We present curated and contextual lending industry and related news …

IN BITS:

Months of wait is finally coming to an end for several platform lenders with the likes Funding Circle, ArchOver and Zopa receiving authorisations from the FCA.

Exactly a year after the Lending Club fiasco, the securitisation market for marketplace loans in the US experienced its largest month ever with issuance volumes since April 2017 surpassing that of Q1 2016.

It seems like the ETF bug might soon hit the ABS market with Blackrock filing to release iShares Consumer Asset-Backed Securities ETF.

And, after nearly a decade, debt has made a comeback in the US but in a flavour different to 2008 — it’s student and auto loans now leading the way with mortgage debt at a lower share.

IN BYTES:

Funding Circle, the largest peer-to-peer company in the UK, has received authorisation from the City watchdog in a seal of approval for the burgeoning small business lending site. The same day, another small business lender, ArchOver released a similar news. Linked Finance, an Irish lender, was also given the same blessing a few days earlier. All of these followed Zopa’s FCA authorisation two weeks ago. Read more.

Marshall Wace Eaglewood, managers of the pioneering P2PGI, will merge with Pollen Street Capital to create a £2 billion ($2.6 billion) firm — one of Europe’s largest investment managers focussed on specialist lending assets. Read more.

The BBA reported that ‘High Street Banks’ experienced a growth in consumer credit of 6.4% last month (up 10% from April 2016) while business lending was flat possibly due to the current uncertain economic climate. High Street Banks are made up of 21 UK institutions across the banking groups of Barclays, HSBC Bank, Lloyds Banking Group, Royal Bank of Scotland Group, Santander UK, TSB and Virgin Money. Read more.

KPMG and Twino (unsecured consumer lender) have released a report which provides more information about alternative lending across Europe. Read more.

Americans have now borrowed more money than they had at the height of the credit bubble in 2008, just as the global financial system began to collapse. Trouble seems to be brewing in a few areas with suspicions of fraud in some auto loan applications, a decline in credit-card recovery rates and an increase in late payments on private student loans. Read more. Companies like Alterest are looking to provide more visibility to parts of the lending markets so participants are better informed of their risks than ever before.

The combination of high levels of debt together with the phenomenal recent volumes of ETFs seems to have opened up an opportunity with Blackrock planning to release an iShares Consumer Asset-Backed Securities ETF which will invest in notes supported by consumer loans, such as student debt and credit cards, according to a regulatory filing on Friday. If approved, it will be the first ETF to target the ABS market. Read more.

A huge ruckus was created when Lending Club faltered last year. A lot of folks misinterpreted the idiosyncratic missteps as fault lines within the entire online lending industry. However, as with any new industry, as kinks get ironed out, confidence returns. The same is true here and bond buyers are flocking back to online lenders’ debt. Since April, over $2bn in securities backed by loans made by marketplace lenders have been sold or are being prepared for an imminent sale. The fundamentals have always remained strong and we expressed this in a piece by Alterest’s founder last July.

The Church of England seems to have the blessings of an even higher power as its £8bn investment fund became a top world performer reporting returns of 17.1% in 2016! Read more and here’s an analysis of the remarkable success of the religious endowment which has managed a 9.6% average annual rate of return over the last 30 years!

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July 16, 2017
by 
Jeevan Param

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