Europe’s clamouring demand for loans to support corporates, as illustrated by the funding for lending scheme in the UK and similar initiatives elsewhere, is not able to be meet by banks alone, according to a new report from Citi entitled ‘The Credit Fund Opportunity’, leaving the way open for alternative investors to fill the credit gap.
The report looks at the non-bank lending landscape in Europe and the emerging credit funds field on the capital markets, which may offer succour to treasurers seeking funding.
Citi’s report says that over the next five to ten years, more than US$1 trillion worth of loans will need to be financed to keep the European economy growing. The International Monetary Fund (IMF) estimates that European banks need to reduce their asset base by US$2.6 trillion, with 25% from lower lending and 75% from asset sales or profit retention. That being the case it is obvious that new non-bank forms of lending will be required from the capital markets and elsewhere.
Like any new market development, there is inherent risk and opportunity in the emerging non-bank credit funds sector, however, concludes Citi. There are also outside factors to consider for fund managers in this field such as new regulation, operational complexity and client service needs.