Loss of market share by traditional lending may be permanent said ABFA chairman Peter Ewen
– Basel III makes return to unsecured lending unlikely
The loss of market share of traditional lending since the credit crunch may prove to be permanent said Peter Ewen, chairman of the Asset Based Finance Association (ABFA), the body representing the asset based finance industry in the UK and the Republic of Ireland.
In his opening address at the ABFA Annual Conference in Birmingham on June 3, Peter said that there is an increasing view that traditional lending may never return to pre-recession levels, as banks and other funders increasingly prefer asset based finance and other forms of alternative finance to fund growing businesses.
Peter explained the capital holding requirements contained in the Basel III regulatory framework incentivise lenders to write secured lending rather than unsecured traditional lending helping drive this shift to types of lending that are less risky to the funder.
Peter said: “Traditional lending is still falling far short of pre-recession levels, and banks and other funders are rightly more cautious of unsecured lending. With invoice finance and other forms of asset based lending offering borrowers so much flexibility it has hard to see why the trends of the seven years should reverse.
“That makes asset based finance the real alternative to traditional loans and overdrafts, as it is anchored to the solid foundation of real assets, which is deeply attractive in the wake of Basel III.”
Businesses in the UK received an all-time high £19.4bn of funding through asset based finance in Q4 2014, an increase of £1.6bn on the same period a year ago. Businesses are now using 38% more asset based finance than at the height of the recession in December 2009, when £14.1bn was provided.