Thursday, January 28, 2021
Corporate Compliance Insights
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Articles
    • See All Articles
    • NEW: COVID-Related
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Leadership and Career
  • Vendor News
  • Jobs
  • Events
    • Webinars & Events
    • Submit an Event
  • Downloads
    • eBooks
    • Whitepapers
  • Podcasts
  • Videos
  • Subscribe
No Result
View All Result
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Articles
    • See All Articles
    • NEW: COVID-Related
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Leadership and Career
  • Vendor News
  • Jobs
  • Events
    • Webinars & Events
    • Submit an Event
  • Downloads
    • eBooks
    • Whitepapers
  • Podcasts
  • Videos
  • Subscribe
No Result
View All Result
Corporate Compliance Insights
Home Governance

The Rise of the Non-Bank Lender, Part 2

by Ron Meyer
January 13, 2016
in Governance
The Rise of the Non-Bank Lender, Part 2

In the first installment of this series, we summarized that banks appear willing to forego lending activities where returns are small and market presence cannot be justified.

On the other hand, there are the non-traditional sources of funding. Comprised of financial technology firms, insurance companies and more recently, traditional credit users, such as private equity firms and asset managers. Some are growing so quickly that they are now considering an initial public offering or have already done so. While these non-traditional sources of funding currently represent a small portion of the greater $13 trillion loan industry which it targets, Goldman, Sachs and Co. estimates that in excess of $11 billion in profit is at risk of exiting the traditional banking industry as shown below:

image001

Many point to eased regulatory oversight for non-traditional lenders creating this opportunity. They contend Dodd-Frank, Basel and the Consumer Protection Act subject traditional banks to a higher level of regulation which non-traditional banks are able to circumvent due to their operating models and size. However, regulation of non-traditional lenders has become an increasingly important topic as they continue to grow in size and evolve their operating models. The U.S. Federal Reserve System has already commented that it has concerns about what they call the “shadow banking system” and its risk potential. In preparation, non-traditional lenders are actively recruiting former regulatory officials in an advisory capacity to combat anticipated regulation (Social Finance – Arthur Levitt, Chairman of the SEC 1993-2011). Linedata sees increased regulation as inevitable as these organizations continue to grow in size. In fact, as of April 2015, four non-traditional lenders have been deemed systemically important under Dodd-Frank.

But the largest driver behind this shift is the fact that banks have done little, if anything, to combat it. Traditionally, banks have not been early adopters of technology. Core competencies of non-traditional bank lenders are cheaper operations and making the process easier for clients. It is this contention of being stuck in a legacy mindset that makes banks appear unresponsive and reluctant to change. However, banks are quick to point out what they consider to be fundamental flaws in the “shadow banking system” and in non-traditional lenders, often referring to them as “alternative lenders” and in doing so, implying they are not primary resources for capital.

Opponents of the “shadow banking system” have argued that non-traditional lenders are less regulated and the business in which they engage is riskier from the client’s perspective. To some extent, this challenge has merit. Regulation has not yet been fully enacted for non-traditional lenders, and as a result of their operating models, they are less capitalized with repurchase risk even if they do not hold loans on their balance sheet. This likely means that non-traditional lenders do not have “deep pockets” to absorb losses in the event of an economic downturn.

To be continued in the next installment…


Previous Post

How the West Can Win

Next Post

CFPB Takes a Stand on Oral Recordings

Ron Meyer

December 8 - Ron Meyer headshotRon Meyer joined Linedata in 2010 and is a Senior Business Advisor for Capitalstream.  He is responsible for directing the company’s credit-related systems initiatives and enhancing data governance and stewardship efforts. With over 27 years of banking experience and a particular focus on commercial lending, Ron has worked in a multitude of lending positions including credit origination, administration, servicing and asset risk management.  Prior to joining Linedata, Ron served as Vice President and Loan Operations Manager for AMCORE Bank N.A, and Vice President and National Operations Manager for Banco Popular.

Related Posts

illustration of executive standing center stage with team in silhouette behind him

COVID-19: Navigating the “CEO Moment”

January 13, 2021
clipboard with silver bow and new year's resolutions list on blue background

New Year’s Resolutions for the Board in 2021

January 11, 2021
PwC: Board Effectiveness – A Survey of the C-Suite

PwC: Board Effectiveness – A Survey of the C-Suite

December 28, 2020
quality level dial set to "high"

Caremark: Even the Highest Standard Can Be Met

December 23, 2020
Next Post
CFPB Takes a Stand on Oral Recordings

CFPB Takes a Stand on Oral Recordings

Access realtime data
Dynamic Risk Assessments with Workiva

Special Coverage

Special COVID page graphic

Jump to a Topic:

anti-corruption anti-money laundering/AML Artificial Intelligence/A.I. automation banks board of directors board risk oversight bribery CCPA/California Consumer Privacy Act Cloud Compliance communications management Coronavirus/COVID-19 corporate culture crisis management cyber crime cyber risk data analytics data breach data governance decision-making diversity DOJ due diligence fcpa enforcement actions financial crime GDPR GRC HIPAA information security KYC/know your customer machine learning monitoring ransomware regtech reputation risk risk assessment Sanctions SEC social media risk supply chain technology third party risk management tone at the top training whistleblowing
No Result
View All Result

Privacy Policy

Follow Us

  • Facebook
  • Twitter
  • LinkedIn
  • RSS Feed

Category

  • CCI Press
  • Compliance
  • Compliance Podcasts
  • Cybersecurity
  • Data Privacy
  • eBooks
  • Ethics
  • FCPA
  • Featured
  • Financial Services
  • Fraud
  • Governance
  • GRC Vendor News
  • HR Compliance
  • Internal Audit
  • Leadership and Career
  • Opinion
  • Resource Library
  • Risk
  • Uncategorized
  • Videos
  • Webinars
  • Whitepapers

© 2019 Corporate Compliance Insights

No Result
View All Result
  • Home
  • About
  • Articles
  • Vendor News
  • Podcasts
  • Videos
  • Whitepapers
  • eBooks
  • Events
  • Jobs
  • Subscribe

© 2019 Corporate Compliance Insights