Banks

on the rebuildingsociety.com blog

23rd Jun, 2015

Peer To Peer Lenders Need Not Fear “Shadow Banking” Risks

Attempts by some in the banking world to associate peer to peer lending with “shadow banking” simply don’t pass muster.

Shadow banking typically refers to hedge fund, private equity and other activities of the type that the International Monetary Fund says contributed to the economic crisis that began in 2007. As bank leaders try to paint peer to peer lending with that same brush, leaders in the P2P industry like Zopa founder Giles Andrew have been quick to distance themselves from shadow banking as a label and approach to finance.

“When Zopa became the first P2P platform to launch in 2005, we knew that persuading consumers to trust us with their cash was crucial to our business. This meant being a transparent and responsible lender from the start, extending credit to “super-prime” borrowers and building a risk function robust enough to withstand the seismic economic shocks that came along a few years late,” Andrew stated. “The activities of the P2P lender that I helped set up, Zopa, are as far from shadowy as the most diligent regulator could hope for. A founding principle of P2P lending is to ensure that platforms are open and transparent about lending.”

Likewise, rebuildingsociety.com endeavours to uphold the highest standards of financial integrity, user trust and transparency.

“It’s great that people are beginning to think of the peer to peer industry as trustworthy enough to be considered an alternative to the banks, but the differences between the two models are noteworthy,” said Adam Knott, rebuildingsociety.com’s Digital Marketing Manager. “rebuildingsociety.com will always strive to offer a fair and transparent service and a genuine choice for investors and borrowers alike.”

As the banking model is challenged by alternatives, it may continue to vilify those it views as competitors. However, good peer to peer lenders will continue to pursue a promising financial model with a spirit of fairness and honesty.


21st Apr, 2015

Never Again will we Capitulate in the Face of a Banking Crisis

It’s been a busy week for the political parties as they publish manifestos. While there are broad statements of intent, there is a concerning lack of detail around banking reform and mitigating the next banking crisis. With so much debate on austerity measures, political leaders are jockey to win points for their ideas on dealing with the symptoms, rather than tackling the cause. The banking system is far from fixed and there is sparse debate on the subject…

In the seven years before the financial crisis, lending to non-financial business accounted for just 8% of the total lending by UK banks. In fact, net lending to SMEs (that’s gross lending less repayments) was negative in the Bank of England’s most recent figures. Some of this is compensated with non-bank lending thanks to the rise of p2p lending and firms like rebuildingsociety.com

The banking system needs to do a better job of supporting businesses according to the manifestos of the three main parties published this week. Labour promise to “develop a banking system that works for businesses in every region and every sector in Britain”. The Conservatives “will continue to build a stronger, safer and more secure banking system that… provides businesses with the finance they need to grow and create jobs” and the Liberal Democrats pledge to “grow a competitive banking sector, support alternative finance providers and improve access to finance for business and consumers”.

But there’s a lot more to financial reform than supporting SMEs…

Do the political leaders really think that Basel III goes far enough?!

Do politicians really believe that the reforms of the last five years have fixed the financial system, and that this is something we no longer need to worry about? Experts continue to warn that the next crash could be just around the corner, and research from NEF shows that the UK remains uniquely exposed.

Meanwhile, mis-selling scandals continue to pop up with depressing regularity – even the Pensions Minister seems worried that the government’s latest pension reforms may build the next wave of mis-selling as unscrupulous dealers rush to take advantage of vulnerable pensioners. Have we reached the goal of a financial system that is stable, sustainable and fair?

The stakes could scarcely be higher. So why are our politicians so reluctant to talk about financial reform? Perhaps they are in the pockets of the industry…? Or maybe they just think that financial reform is not a voting issue – that ‘banker bashing’ has become unfashionable.

If the new government doesn’t seek to reform the financial system, then it’s even more important we work together to dis-intermediate finance. Bypassing the banks is one way you can play a small part in helping avert the next financial crisis.

Alas it seems we’ve got a long way to go on our mission; but while society needs work, we’ll keep rebuilding.

If you’re not a member and would like to help with the rebuild, please register here.

This article was inspired by posts from Positive Money and the New Economics Foundation. Please help spread awareness. There’s no excuse to be unprepared for the next crisis.

Photo Credit: CC: Rob Taylor


10th Sep, 2014

Interest rates might rise in 2015, but who should be concerned?

After five years of record lows, Mark Carney seems to be preparing the UK for a rise in the early part of 2015. It’s an encouraging sign of health in the UK economy, particularly after the Bank of England’s governor identified inflation and unemployment as the barometers for making the change.

This suggests life is getting a bit easier for the vast majority of people in the UK – and the governor has been careful to faze this in slowly – there are many who are concerned about the impact of a rate rise on family and business finances and the wider recovery.

For businesses, the time to read the small print in bank loan agreements is now. Repayments or fees linked to interest rate movements could destabilise a business, so refinancing away from a bank facility now could save a nasty surprise when rates do go up.

(more…)


07th Mar, 2014

Happy Birthday, 0.5% Interest Rates

It’s the five year anniversary of record low interest rates this week and the world is a very different place for many of us now than when the decision was first made in 2009. Peer-to-business lending in its recognised form didn’t exist for one.

Whether you believe the economy is now more sustainable than before or not, financial services providers clearly think the worst is over and believe there is an opportunity to capitalise on the recovery.

This week Moneysupermarket reported that credit card APRs are at their highest average rates since 2001 at 18.17 per cent, while fixed rate and tracker mortgage rates have crept up since last year even, in anticipation of a rate rise and in recognition of easing conditions for consumers.

(more…)


15th Oct, 2013

Panorama: Business Owners Need to Get Out of Banking

Anyone who saw last night’s Panorama (8.30pm, BBC1) would have felt incredibly sorry for the featured business owners whose lives have been ruined by the banks which sold them interest rate swaps alongside business loans.

Business owners are many things, but they are certainly not all financial masterminds and the interest rate swap (there was even a £4.5m swap arranged over the phone while an owner was driving his car) is not a straightforward product. One owner of a children’s playschool in Wales admitted being very risk averse and would not have bought a product that exposed the business to the tune of £100,000.

That’s what he got though. Several years later and having suffered medical problems because of it, the business is just about scraping by and talks are ongoing about redress.

(more…)


24th Jun, 2013

What Will You Do if The Bank Calls in Your Loan?

An afternoon spent with some insolvency practitioners gave Dan Rajkumar a different perspective on why banks may want to remove credit lines overnight and how business owners should guard against the possibility… (more…)


07th Jan, 2013

Disintermediation in Banking is a Positive for Advisers

Here’s a letter from rebuildingsociety.com’s Julian Wells, published in Mortgage Strategy’s 7th January 2013 issue:

I was interested to read that Bank of England executive director of financial stability Andrew Haldane argue that increasing use of technology in organising loan finance could see intermediaries become “surplus links in the chain”.

In an interview with the Independent, Haldane said improvements and innovation in technology, such as peer-to-peer lending and crowd-funding sectors, could see execution-only become a “a more realistic possibility”.

He said: “With an information-based web, the disintermediated model of finance becomes a more realistic possibility.”

A number of brokers took exception to Haldane’s talk of disintermediation on Mortgage Strategy Online.

But I think there’s some confusion here – the term ‘intermediation’ means something different in the banking industry than it does to all of us.

(more…)


25th Oct, 2012

Transferwise – Another Financial Services Innovator we Admire

Sometimes innovations are so simple you have to scratch your head to try and work out why it hasn’t been done before – or curse yourself that you didn’t think about it first.

That’s exactly the feeling you get when you look at Transferwise, an online currency exchange service that uses the mid-market exchange rate and charges just £1 for a transfer of less than £300.

So you’re saving on the exchange rates typically charged by bureau de changes which include a mark-up and service charges.

Transferwise – well done, you’re making it easier and cheaper for individuals and companies to move money around Europe.

No doubt the banks will look at the simplicity of the approach and bemoan the overheads that cause them to pass charges much larger in comparison on to the customer.

They’ll also be concerned about the impact on profits. Currency exchange is a lucrative revenue stream and customers now have a viable alternative which means they don’t have to accept previous high charges as a necessary cost of their transaction.

It is similar to the way users of peer-to-peer and peer-to-business lending platforms are benefiting from innovations in finance.

(more…)


23rd Oct, 2012

Business Desk Features rebuildingsociety.com

Investors turning to crowdfunding for financial support

CROWDFUNDING is increasingly being turned to as an avenue of funding for start-up companies. Ian Briggs reports on those aiming to make Yorkshire a key centre for the sector’s growth.

(more…)


05th Oct, 2012

Interest Rates Won’t Affect Your Crowdfunding Loan

It’s common practice for banks to sell loans or credit facilities which factor in things out of the borrower’s control like interest rates or inflation and link them to repayments – it’s how so many businesses were missold interest rate swaps.

Crowdfunding loans through rebuildingsociety.com doesn’t work like that.

If a business takes out a loan using crowdfunding, the rate is fixed at the agreed level, regardless of whether the base rate shoots up from 0.5 per cent or stays the same over the period of the loan.

If you get a comparatively good rate now – so anything less than your bank is offering – you’ll be working with an even better comparative rate a few years down the line if the base rate has risen and your competitors are bleeding money to stay on top of their repayments.

Plus you can always repay a loan early should you have an especially profitable period.

The crowdfunding model was designed for flexibility, so if you pay off your loan, who are we to stop you?


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