In the coming years we will find that traditional UK clearing banks have the greater share of the market in regional cities.
In 2012 the introduction of the Basel III banking reforms mean that banks will seek to retain of more of their capital against any loans.
Add to this the massive amount of loan maturities during 2010 and we can expect most lenders debt to fall.
It is probable that borrowing money will become a lot more expensive. We have already seen a rise in the cost of debt which is taken out over the longer term. Imminent interest rate rises will only add to the costs.
Banking Reforms Changes Happening Now
Currently there are 69 lenders doing business in the UK, and CBRE say;
that a number are lending only cautiously and most are employing conservative criteria against which they assess opportunities.
What we have seen for some time now is banks cherry-picking only the best and cleanest of individuals to lend to. In the current market there isn’t a single bank which is prepared to offer every type of loan now.
In the past UK borrowers would have been able to use Royal Bank of Scotland for every type of loan. Of course, the Irish version of the same was Anglo Irish Bank. Now the tables are already turning and its borrowers that need to shop carefully themselves by tailoring the deals in specific ways with specific banks to have any hope of getting the loan cleared.
Insurance Companies Enter The Market
The new banking reforms mean that we are now seeing the insurance sector winding up for a greater involvement in property debt instead. It is now highly likely that a major shift in the market will appear as different types of lenders enter, which will enable insurance companies to have the greatest impact and hence increasing their market share the quickest.
German banks are already making a move to enter the market and will aim to be a dominant factor in coming years.
When the downturn began there were 38 lenders with UK exposure. These have now ceased all new lending. Of those, 70% were European banks or building societies and investment banks who were the traditional lenders of debt to the industry.