Banks Still Fund the Shadow Bank Market David Gustin - February 9, 2016 3:08 AM | Categories: Alternative Finance | Tags: ApexPeaks, ArrowGrass Capital, BNYM Insight Investment, Credibly, Demica, Fintech, Greensill Capital, Nipendo, Shadow Banks, Tungsten I have to laugh as I continue to see confirmation that banks still fund a big part of the Shadow Bank market. Most of you who read TFM know there is a massive movement to create non bank entities to fund wholesale and consumer credit. We are dealing with many of those platforms that enable the transfer of assets here on Trade Financing Matters and Spend Matters. Recent deals of Banking/Funding/Payment providers partnering or buying platforms Nipendo / Integrate Financial Tungsten / BNYM Insight Investment Basware / Arrowgrass Capital Taulia / Greensill Capital ApexPeaks / ASYX Demica / JRJ Group And yet two news stories came across my desk last week, each in their own way showing how banks still are “the Playa” when it comes to financing FinTech. The first story is from Credibly, a small business lending platform since 2010 that announced a $70MM credit facility led by SunTrust Bank. Banks make loans to other specialty finance companies out of their Financial Institutions Investment Banking group. In Credibly’s case, the new credit facility is consistent with Credibly’s three-prong financing strategy: on-balance sheet, whole loan sales, and securitization. On balance sheet is supported by Suntrust. AloStar provided their first credit facility back in 2014 along with an unnamed Private Equity group. The Suntrust terms allow flexibility for the credit facility to expand up to $100MM, which more than doubles Credibly’s on-balance sheet funding capacity. See the story here The other story came out in the WSJ where J.P. Morgan agreed to acquire nearly $1 Billion worth of Lending Club loans. Large banks are finding their return on equity declining rapidly in this new regulatory era, and flush with deposits with little outlets. JPMorgan agreed to buy consumer loans with a FICO score of 700+, so prime grade. Perhaps it is a sign of confidence in the new consumer lending model, or a sign banks need to increase ROE given market conditions. See story here One thing for sure, Banks put these solutions through the compliance and analysis rigor, so it is not so simple for specialty finance companies or non banks to access a line of credit these days. Don't forget to sign up for TFMs weekly digest delivered to your inbox every Monday here Related Articles Even McKinsey Does Not Fully Understand Supply Chain Finance Goldman Sachs suggests larger role for Shadow Banks Alternative Finance and Shadow Banks – Voodoo or Hail Mary? Future Goldmine or Roadkill? Partnerships abound in Alternative Business Finance… Time to Clarify the Confusion around Alternative Business Finance ApexPeak on Supply Chain finance Fintech acquisition streak Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of new posts by email.