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|Gabriella Kindert, Head of Alternative Credit at NN IP, outlines her predictions|
|Thursday, 05 January 2017|
“European banks will continue to shrink their balance sheets and will invest in new business models and partnerships in 2017,” according to Gabriella Kindert, Head of Alternative Credit at NN Investment Partners, outlining her predictions for the Alternative Lending landscape in 2017.
“With the extension of the quantitative easing program, interest rate hikes are pushed well into the future, forcing banks to be more efficient with all of their key resources. Banks will need to explore alternative lending avenues and strengthen cooperation with institutional investors and Fintech companies, creating opportunities for investors or potential partners who offer balance sheet capacity or more efficient business execution.
She adds: “Next, I believe political support for developing alternative lending channels in Europe is set to grow. We see strong evidence that the conviction among key decision and policy makers in Europe is leaning towards increased lending via alternative sources. Over-reliance on banks made us too vulnerable and constrained our economic development and we need to increase resilience via diversifying funding sources towards the European economy.
“I also believe the search for yield remains a key theme in a low-return, volatile environment. Those who can deal with and accept the illiquid nature of the asset class will find a safe haven in private debt. These assets have limited liquidity and mark-to-market pricing; consequently, they 'look and feel' stable. Institutional investors are inherently more suited to participate in funding the economy because they capture a large percentage of long-term savings,” she added. “ However, while the infrastructure to facilitate this is currently predominantly with banks, the investments need to be channeled via capital markets and partnerships. The growth of partnerships has been painstakingly slow. There needs to be significant education and convincing done also at supervisory board level at these institutions.
“Finally, 2017 is likely to be an important year for Fintech with many business models being tested on their ability to scale and operate under increasing regulatory scrutiny. Payments and blockchain services are likely to cause the most disruption and we will see further diversification of deposits payments from retail clients. New partnerships as well as methods of connecting borrowers and lenders are born.”
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