This has been a difficult year for the banking sector, with three US bank collapses and a forced takeover in Switzerland. Indeed, last week’s takeover of First Republic by JP Morgan Chase brought banking back into the headlines in a way most would prefer not to see. Nevertheless, Laura Holtham, partner at law firm Ogier Leman, said that recent events have been driven by important specificities.
Beyond the international banking story, discussion about the role and availability of finance in Ireland has turned to non-bank lenders – often in reference to mortgages, but they are also present in other sectors. Central Bank of Ireland figures indicate that non-bank entities lent Irish SMEs €1.6 billion in 2020.
“I think there are a number of factors. The additional regulation that has been put on traditional banks means they are less able to take risky positions, and that has created a gap for alternative lenders to step in,” she said. Holtham said that given how alternative lenders meet a growing need, they are likely to become a permanent fixture of the lending landscape. There is always going to be a place for the traditional lenders, she said, but recalibration in the real estate sector with uncertain valuation and increased costs, as well as the macroeconomic picture, has created more space for alternatives.
“There’s a retreat away from looking to banks for financing in the SME sector along with increased lending from private equity, and now it’s not uncommon for us to work with funds, where we have very good contacts, we’ve got a big global network,” she said.