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from Breakingviews:

LendingClub IPO mixes disruption with confusion

By Kevin Allison and Daniel Indiviglio

The authors are Breakingviews columnists. The views they express are their own. 

LendingClub is positioning itself as one of the biggest challengers to American banks. The company is growing quickly, has backing from the likes of Google and lists former Morgan Stanley boss John Mack and ex-Treasury Secretary Larry Summers among its directors. It’s also planning an initial public offering. But there are reasons to be cautious.

LendingClub charges a fee to match borrowers with institutional and retail investors and takes no credit risk. It doesn’t need branches, deposits or loan-loss buffers, so can usually offer better rates for the loans it facilitates – up to $35,000 for individuals and $100,000 for small businesses.

Revenue this year may hit 30 times its 2010 level. The company arranged $2.1 billion of loans in the first six months of this year, almost a threefold jump. And it reckons some $380 billion of consumer credit falls in its territory.

from The Great Debate UK:

Financing must improve if UK auto sector is to thrive

--Guy Walsh is Regional Director at ABN AMRO Commercial Finance PLC. The opinion expressed are his own.--

The automotive industry is the UK’s largest sector in terms of exports, generating around £30 billion of annual revenue, but many smaller players in the sector languish due to a lack of funding.

from The Great Debate UK:

Mental accounting – the jar fallacy

--Ian Bright is Senior Economist at ING. The opinions expressed are his own.--

When Dustin Hoffman was first starting out as an actor, struggling to make ends meet, he managed his money in a simple – but potentially financially dangerous – way.

On a tight budget with little income, Hoffman kept the money he had in separate jars for food, rent and other expenses. The story is retold in Richard Thaler and Cass Sustein’s famous behavioural economics book Nudge.

from India Insight:

Bandhan eyes India’s banking league with RBI licence

Kolkata-based Bandhan Financial was little known in India’s corporate arena. But a new banking licence from the Reserve Bank has given Managing Director Chandra Shekhar Ghosh and his 13,000 employees a reason to cheer.

“This is a different type of win. In the last 13 years they (employees) have been working hard and now they have got the recognition,” said Ghosh. “I hope that this is not a big challenge, the challenge is to develop the skills of the staff, it will take some time.”

from Breakingviews:

Fannie investors may be using magic calculators

By Daniel Indiviglio and Richard Beales
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Fannie Mae investors may be using magic calculators. With the latest reform blueprint taking shape in the U.S. Senate, hedge funds like Fairholme Capital Management have urged Washington to revitalize Fannie, the mortgage finance giant, which along with Freddie Mac was kept alive with nearly $190 billion of taxpayer cash in the aftermath of the financial crisis. The prospect has pushed up the price of Fannie’s preferred stock more than 10-fold in 18 months. But according to a Breakingviews analysis, even cheerful assumptions suggest Fannie’s business isn’t worth enough for shareholders to get much if anything back.

from Breakingviews:

World Bank boss Kim tested by Honduran loan fracas

By Christopher Swann
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Newish World Bank President Jim Kim’s goal of cutting $400 million from the multilateral lender’s budget just got harder. With the Washington-based institution under fire for lending to a Honduran company accused of thuggish behavior, the temptation will be to add to red tape. That would slow the already sluggish loan process and impede efforts to cut poverty.

from India Insight:

Connecting borrowers and lenders: Indians try peer-to-peer model

Srinivas Porika tried for months to get a loan of 250,000 rupees ($4,000) to pay for his sister’s wedding, but every bank he tried turned him down. The problem: Porika’s employer, a tech start-up company, was not on the banks’ lists of pre-approved companies.

“They were ready to give me a credit card, but were not ready to give me a loan,” said the 28-year-old from Hyderabad, who met several bank managers and officials to plead his case.

from Breakingviews:

Imagine a world without debt

I have a dream: a world without debt, and with much more equity. It’s not just that summer holidays are a good time for fantasising. The fifth anniversary of Lehman Brothers’ bankruptcy is a month away, and regulators have recently forced both Deutsche Bank and Barclays to issue more shares.

Some regulators’ beach thoughts may drift to the magic numbers of bank capital ratios. My approach is less technical and more philosophical. I wonder why the financial system relies so much on debt. Loans and bonds are poorly designed for their primary economic purpose - investment.

from Breakingviews:

China’s PBOC serves reformists an amuse-bouche

By John Foley

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

China’s central bank has just whetted the appetites of reformists. The People’s Bank of China said on Friday that starting immediately it will let banks lend as cheaply as they like, removing the floor of around 6 percent for one-year loans. It smells like interest-rate liberalisation, but it’s only an amuse-bouche.

from Breakingviews:

Lending squeeze tests faith in China’s authorities

By Peter Thal Larsen
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Forget U.S. talk of monetary “tapering”: to see what it really looks like when liquidity is sucked out of the market, look to China. A standoff between the People’s Bank of China (PBOC) and the country’s overextended lenders has pushed short-term interbank rates to record highs. China’s closed and state-controlled financial system has a better chance of averting the kind of meltdown that took place in the United States and Europe during the financial crisis. But everything hinges on the authorities’ ability to react quickly and decisively.

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