Treasury and Bank of England discussing financial support for non-bank lenders

Giving evidence to the Treasury Select Committee of MPs, UK Finance CEO Stephen Jones explained that non-bank lenders financed through bank lines and then into securitisation structures were suffering.

“Those funding structures are not working at the moment because the underlying markets are not working,” Jones said.

“And we are in very detailed discussions with Treasury and the Bank of England to try and design a scheme that will enable those incredibly important credit transmission mechanisms, often to underserved segments of the consumer and SME markets, to be able to be continue to operate.

“Because we need it to be able to operate coming out of this crisis.”

He continued: “I wouldn’t say it’s a bank not lending to non-bank I don’t recognise that construction of it, but I do recognise that for non-bank specialist finance providers who rely on wholesale funding, their funding models are not working at the moment.”

Capital markets ‘effectively closed’

The plight of non-bank lenders has become severe since the coronavirus crisis began with several lenders forced to stop accepting new applications and halt those already in its pipeline.

Last week trade body the Finance and Leasing Association (FLA) warned that the capital markets which provide funding for these non-bank lenders were “effectively closed”.

It called for government support to help these lenders, echoing previous calls from others including Landbay co-founder and CEO John Goodall.

FLA director general Stephen Haddrill, who was also giving evidence to the select committee, repeated that non-banks were having trouble accessing capital markets.

“The term funding scheme from Bank of England for SMEs flows into banks, it doesn’t flow into the non-bank sector so I think we need something similar for the non-bank sector,” he said.