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  • Making it harder to be a bank Posted on 08 July 2015

    Today’s Budget announcement that the bank levy will be replaced by a new surcharge on bank’s profits seems to be bad news for asset finance. Unlike the bank levy which only applies to the largest banking groups, the new 8% surcharge on profits will apply to all banks with profits over £25 million.

    This must remove an incentive for non-bank asset finance companies to convert to banks. The announcement seems to fly in the face of the Government’s efforts to boost competition in small business banking. For asset finance, it means that non-banks’ existing reliance on the large banks will be further ingrained.

    Perhaps it’s no coincidence that in the details of todays’ Budget announcements the Government has yet again sought to promote alternative finance providers. The Innovative Finance ISA, for Peer to Peer loans, will launch in April 2016 it was confirmed. A new consultation was also issued on whether to extend the list of ISA-eligible investments to include debt securities and equity offered via a crowd funding platform.

    Crowd funding is still ‘off the radar’ for many in the asset finance industry (but certainly not the brokers). However if we needed any further reason to take another look at this alternative to bank finance it was announced today that ‘peer-to-business’ lender Funding Empire has sold a majority stake to Paratus AMC.

    Caerphilly-based Funding Empire is only small but this move is significant for two reasons. First, Funding Empire is a specialist in asset-backed loans to businesses. Second, according to trade publication altfi news, this is the first takeover of an alternative finance platform by a traditional financial services company in the UK.

    Today’s new consultation suggests that the Government has not yet made any decisions on the scope of any extension of ISA-eligible investments. The case for including asset finance platforms, particularly if they can benefit from the skills and infrastructure of traditional funders, should be made. If it's going to be harder to be a bank, non-bank finance companies will increasingly be looking for alternative sources of capital for lending.

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