NEWSLETTER of December 15, 2023

The following content has been added at finexpert:

Bain & Company
UNITED WE THRIVE: THE UNTAPPED POWER OF BANK-FINTECH PARTNERSHIPS
When it comes to moving quickly on innovative products or going to market, many banks are stepping up partnerships with fintechs—start-up or scale-up businesses that leverage technology to fulfill functions required to deliver offerings to customers—rather than building a product or capability themselves. The model is particularly salient given recent developments. For one thing, Covid-19 boosted consumers’ demand for digital interactions. Digital acceleration changed everything from the user interface to the type of products a bank can offer to security protocols. These changes were hard to accomplish quickly using only a bank’s internal resources, so banks had to look outside for help. Moreover, volatility caused by the pandemic put a premium on agility and flexibility—which partnerships can address. >more

KfW Research
KMU VERZICHTEN HÄUFIGER AUF BANKKREDITE – ZINSNIVEAU SPIELT DABEI EINE GROßE ROLLE
The monetary policy turnaround initiated in summer 2022 has noticeably changed the financing environment for small and medium-sized enterprises in Germany. A special survey on the KfW SME Panel from September 2023 shows that around seven out of ten companies that have conducted loan negotiations with banks or savings banks in the current year rated the interest rate offered to them as too high. Other problems follow at a considerable distance. >more

Deloitte
KAPITAL FÜR DIE ENERGIEWENDE
The German energy industry is facing huge investments: More electricity generation from renewable energies, expansion and digitalization of the electricity grid, new infrastructure for e-cars and district heating and, last but not least, ensuring supply during dark doldrums. A position paper prepared jointly by Deloitte, the German Association of Energy Industries (BDEW) and the Association of Municipal Enterprises (VKU) with the support of Die Deutsche Kreditwirtschaft (DK) outlines ways out of the financing dilemma. >more

Bank for International Settlements
BIS QUARTERLY REVIEW: DECEMBER 2023
Bond markets remained volatile, with yields oscillating on evolving investor perceptions of the future path of policy interest rates; announcements of sovereign debt issuance also played a role. Risky asset markets lost ground before recovering, following the path set by bond yields, while conditions in credit markets remained benign. EME financial markets grappled with swings in US yields and changing pressures on domestic currencies. Portfolio outflows continued, reflecting a divergence in expected interest rate paths. >more

LENDER AUTOMATION AND RACIAL DISPARITIES IN CREDIT ACCESS
Sabrina T Howell, Theresa Kuchler, David Snitkof, Johannes Stroebel, and Jun Wong
2023
Process automation reduces racial disparities in credit access through enabling smaller loans, broadening banks’ geographic reach, and removing human biases from decision-making. We document these findings in the context of the Paycheck Protection Program (PPP), a setting where private lenders faced no credit risk but decided which firms to serve. Black-owned firms primarily obtained PPP loans from automated fintech lenders, especially in areas with high racial animus. After traditional banks automated their loan processing procedures, their PPP lending to Black-owned firms increased. Our findings cannot be fully explained by racial differences in loan application behaviors, pre-existing banking relationships, firm performance, or fraud rates. >more

SHORT CAMPAIGNS BY HEDGE FUNDS
Ian Appel, and Vyacheslav Fos
2023
Recent years have seen the rise of short campaigns by hedge funds. Nearly 80% of campaigns are undertaken by activist hedge funds, particularly those that employ hostile tactics in their long campaigns. Short campaigns are associated with negative abnormal returns of -7%, with aggregate valuation effects similar in magnitude to the gains from long activism campaigns. In contrast to long campaigns, public communication is a critical component of short campaigns. We do not find evidence that such communication is manipulative. Overall, our analysis highlights the importance of short campaigns for understanding the economic impact of activist hedge funds. >more