Latest BIS growth agenda initiative will examine structural and behavioural barriers to raising non-bank finance
UPDATE 16 March 2012: The Taskforce has now published its report, which we discuss in this post.
The Department of Business, Innovation and Skills yesterday announced the formation of an “industry-led Taskforce…that will examine the challenges facing business in diversifying their finance”. The context of this exercise is the difficulties that small and medium-sized businesses report in obtain bank lending, and its implicit aim is to promote different methods of non-bank lending. BIS’s press release states that the Taskforce’s focus will be:
“on debt and credit products, looking at a range of finance choices, old and new, from corporate bonds to ‘crowd-funding’”.
The reference to corporate bonds is to the recent increase in:
- private placements of debt by unlisted companies in the UK, often offered to their own customers (see this recent effort by Caxton FX); and
- the ORB debt market operated by the London Stock Exchange, which we discuss in this post.
“Crowdfunding” is a generic term applied to lending aggregated from a group of individuals or non-bank corporate lenders to private companies (disintermediating the banking sector in the process), of which the leading example in the UK is Funding Circle.
The BIS press release has the Business Secretary saying:
“There are exciting innovations emerging that provide alternatives to bank lending. Businesses are selling bonds directly to their customers, missing out the middle-men. And peer-to-peer lending has opened up opportunities for savers to invest directly in the fortunes of UK businesses. I want to investigate and dismantle any barriers to these and future innovations.”
The Taskforce will be led by Tim Breedon, chief executive of Legal & General, and will report to the Government in advance of the 2012 Budget statement (scheduled for 21 March 2012). The Taskforce’s call for evidence is here and its terms of reference are here.
The Taskforce was first announced in HM Treasury’s Autumn Statement.
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