Saturday 20 January 2018

As the banks struggle, new model is here right on time

donal O'Donovan

Cantor Fitzgerald's arrival could mean big changes in the way Irish companies are financed by introducing a US-style bond market for even relatively small businesses.

Today, all but the biggest Irish companies depend on banks for credit. That's true across Europe, but not the US. There, the likes of Cantor Fitzgerald have long since broken banks' dominance of the credit markets.

The firm's CEO, Shawn Matthews, says it's a model that can also work here, not least because of the vacuum in lending left by the withdrawal of the banks themselves.

US brokers don't lend themselves, they arrange debt and sell it on to investors such as insurers, pension managers and even private clients.

Small business

For a price, even relatively small businesses can access long-term bond debt or shorter term 'commercial paper'.

With banks here struggling with tougher capital rules and their own limited access to money, it's a model whose time appears to have come.

Bond finance works for standard corporate debt, leaving relationship-driven work such as providing overdrafts and specialist credit facilities to the banks

If it works and Cantor Fitzgerald becomes a significant provider of debt to Irish businesses, the spins-offs in terms of winning private clients could be huge.

That's because it is often hard to tell where an institutional client ends and the private client begins when it comes to family-owned firms.

Irish Independent

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