With global bank shares down double digits on what seems like a daily basis, large banks in the United States propping up smaller or more regional banks that add to the potential panic and regulators and Central Banks nervously and quietly as they can, try to support their financial networks, it would seem a potential banking crisis is looming on the horizon. But what does this mean for those who need liquidity most.
Some Central Banks are quicker to act then others in some cases but with what consequences.
This week in the Financial Times and World News Era Worldnewsera.com there was a story that the Bank of England plans to overhaul Bank Capital rules, which in the current climate is a prudent thing to do but in a report by consultants Oxera, commissioned by SME lender Allica, they found that the proposed changes could result in a £44bn (or 27%) drop in lending to UK SMEs based on the reduction banks would have to make to loan books, if they did not increase the capital used to back that lending, which currently may not be their priority given the general capital increases they will need to make to calm markets and regulators.
SME lending is an important part of the economy’s general heath and if we are to nurture growth that we all so desperately need this and next year; then SME lending must remain at the forefront of this endeavour. Martin McTague, chair of the Federation of Small Businesses, said the BoE’s proposals created a “real risk that lending to the SME sector may become even more expensive, leading to a reduction in the provision of credit and higher interest rates”.
Property backed lending would become more expensive for the Banks and Suppliers alike as capital charges for this activity are so high leaving the Banks to offer mainly unsecured loans which they would be reluctant to do and would force them to reduce there lending activities in that space for SME’s.
The Bank of England’s Prudential Regulation Authority announced the controversial plans to overhaul the capital treatment for small business lending in December, as part of broader proposals to introduce the final package of Basel rules in the UK. The PRA is running a consultation on the proposals that closes next month.
One thing that came from the report was that Oxera said the impact on the market would be mitigated if non-bank lenders increased activity.
Crossflow provides a marketplace with multiple sources of capital, including alternative to Bank funding for Corporates & their Suppliers. An alternative Working Capital Solution ensures suppliers have fast access to multiple funders from different financial institutions provided by our best-in-class tech driven financing solutions. Corporates and their suppliers can quickly work together to solve any payment or financing solution through Crossflow immediately.
Assurance of the payment obligations from the corporate enables competitive cost of finance offered to the suppliers of this corporate rather than direct SME funding offered by banks.
Crossflow has also launched recently a programme for additional £1Bn to be deployed for corporates and their suppliers and helping them to manage the working capital in flexible and faster way, optimising demand and supply from the financial institutions.
To find out what the future of alternative financing looks like for you, contact us today.
Kevin Hayden is an executive level professional with over 35 years of Fintech, Investment & Commercial banking, and software sales & services industry experience, managing key major business and transformation change teams. With an economics and banking background he is driven by challenge and excellence at all levels, he is committed to delivering a long-term partnership with clients that foster trust and build reputations, focused on the transformation of supply chain finance that helps and assists everyone along the journey.
