Today, the financial market is completely globalised, and businesses from all over the world make trades and provide funding internationally. The UK is at the heart of the world’s interconnected financial trading industry, with London as the headquarters of many of the globe’s top brands, a position which provides an enormous source of income to the UK. The countless deals which are arranged in the UK bring many millions of pounds in to the national economy, providing tremendous benefit to the nation’s markets and infrastructure. Because of its significance to the nation’s health, the UK financial markets are strictly regulated and controlled by several Government bodies, as well as organisations which represent the interests of traders and vendors. These bodies exist primarily to enforce ethical trading and practise within the industry in order to guarantee the continued prosperity and stability of this crucial market.
Poorly regulated trading can have a significant negative impact on the state of the economy; not only does fraud and malpractise result in a loss of profits for those involved, it also destroys consumer confidence in the industry. Because the financial markets rely on the trust of the public to function effectively, a few bad apples can spoil the barrel – it’s therefore in traders own interest to self-regulate and weed out any lenders who aren’t conforming to established standards of practise.
One of the most important sectors of the financial industry is that of short term lending, where lenders provide funding for a wide variety of requirements over a relatively short period. Typically, short term loans are used to provide temporary funding whilst long-term solutions are arranged; for example, a short term loan may be used by a homeowner to provide a deposit for a new property before they complete the sale of their current one. By using the short term loan as a “bridge” between two long term ones, the homeowner is able to break the property chain and secure their new property without having to rush into a sale of their old one. Short term loans are also available for larger scale projects, and are often used by property developers to secure a site before construction commences. Because it’s often used as a “bridge” between two long term loans, these types of loans are commonly known as “bridging finance”, and this type of funding is one of the most flexible types of finance available. Because of the options it provides and the possibilities it opens up for business and personal finance alike, short term funding is one of the most important parts of the UK’s financial ecosystem, and as such it requires careful oversight to protect its stability.
Short term finance has only been around for a relatively short period of time, having arisen at some point in the 1960s (no-one’s precisely sure when, as many lenders offered similar products). Because of stringent regulations surrounding the provision of loans, the industry remained a niche sector up until the late 1990s, when new laws were introduced that allowed businesses to take advantage of the possibilities provided by short term loans. The industry grew exponentially during the following decade, but regulatory bodies were unable to keep up, and by the early 2000s a raft of unscrupulous lenders (both short and long term) were offering finance which shouldn’t really have been approved.
Short term finance in and of itself is a perfectly legitimate form of lending, but if misused can cause difficulties when it comes to collect on the loan – this was part of what contributed to the mid-2000s credit crisis, and widespread media reporting of poor trading standards in short term finance created a bad public image for the industry. Because the root cause of these issues was poor judgement and unethical trading practises, the ASTL was formed to protect and improve the short term finance lender’s reputation by enforcing clear, honest standards which developed consumer trust.
Since 2008, the ASTL has existed to regulate, promote and protect the interests of the short term lending industry. This central organisation was formed by 19 of the leading short term lenders at the time to help secure the sector’s future – at the time, the UK financial markets were in turmoil and consumer confidence was at an all-time low. The ASTL was formed to help improve public opinion of the services its members provide, in order to benefit both the financial industry and the UK economy as a whole. It acts as a conduit between the lending community and the regulatory bodies which are responsible for oversight such as the Financial Conduct Authority. As a focal point for the short term lending industry, the ASTL creates a sense of cohesion and community which is vital for the establishment of an honest trading environment.
Although the ASTL is actively involved within the short term lending marketplace, it is neither a lender nor a broker in its own right. The services they offer are not financial in nature, and nor do they offer advice to customers on their members products. However, they do utilise their public profile to list accredited members of the ASTL, which makes the ASTL website a great starting point for customers looking for short term financial solutions.
The ASTL’s code of conduct, which all members must abide by, requires lenders to adhere to a strict set of criteria in order to maintain public confidence in the short term finance sector. These rules are designed to ensure that lenders trade openly and honestly, making sure that borrowers know what costs they’re liable to incur, and maintaining a standard of service across the industry.
The ASTL enforces these rules through an open complaints procedure; members of the public are able to bring complaints against ASTL members, which are then assessed by a specially convened committee to determine whether the process should be dismissed or advanced. Since the ASTL is not a Government body like the FCA it is unable to punish lenders directly; it can, however, suspend or expel members who have been identified as breaking the rules. If a member is found to have broken the ASTL rules an appeal can be lodged before they’re punished, which will require the case to be re-examined by a new committee – this ensures openness and fairness for all members.
The six executive members who make up the ASTL’s board are democratically elected by the organisation’s membership; any member can nominate themselves for election, and elections are held regularly. This encourages members to get involved with the running of their organisation, and to take a hands on approach to the regulation of their industry – responsibility is available for those who have proven themselves hardworking and trustworthy. This clear and democratic election process reinforces the sense of identity that the ASTL seeks to engender within its membership, providing opportunities for members to get involved.
The ASTL’s guiding hand is provided by chief executive Benson Hersch, the only member of the executive committee to remain in place from one year to the next. His role is to provide common ground and continuity between new and old members, to show new executives the ropes and to ensure that organisation is kept cohesive from year to year.
Becoming a member of the ASTL requires that applicants have a sufficient track record to ensure that they meet established guidelines. Upon application, the ASTL will carry out a series of detailed background checks to make sure that the applicant has sufficient trading history to warrant membership of the ASTL, and will adhere to the values and rules which are set out for ASTL members. Since the ASTL’s reputation is based solely upon the conduct of its members, it’s vital that they only admit businesses who can prove their reliability and responsibility.
The short term finance industry is of great interest to members of relevant industries, and membership of the ASTL is often sought by businesses who aren’t bridging finance brokers (and so cannot provide the track record necessary for membership). The ASTL has introduced an “Associate Membership” scheme for representatives of these industries, which entitles them to become part of the ASTL and receive all the benefits which this brings.
Being excluded from the ASTL would not equate to much of a punishment if membership did not bring substantial benefits; therefore, the ASTL works hard to ensure that it remains a relevant and influential organisation within the industry. To do so, it must be representative of the short term lending industry as a whole, and so it goes to great lengths to engender a feeling of community amongst the various lenders who make up its membership – this is even listed in the organisation’s goal to “encourage professional and social interaction between its members”. This is achieved by organising an annual conference for all the members, where they can come together and network with representatives of many other firms which they might not otherwise have contact with. In addition to providing networking opportunities, these conferences also feature a variety of guest speakers from institutions like Savills and the FCA, which allow a broad perspective of the industry to be gathered.
As well as organising an annual conference, the ASTL also circulates a regular newsletter amongst its members. This contains updates on various developments within the industry, expert analysis of ongoing trends and potential threats to traders. This provides a valuable source of information to brokers, as it gives them access to first-hand information which otherwise might only be accessible through third party sources with a focus that’s less dedicated to the stability of short term lenders. This common thread helps to bind ASTL members closer together, giving them regular updates on the state of the industry so that they can keep ahead of the game.
The annual ASTL conferences are always very well attended; in fact, the 2016 conference sold out well before doors opened, which shows just how much demand there is for this once a year event. What is it that makes these conferences so valuable, though? To start with, it allows attendees to gather first-hand information directly from the representatives of different organisations – the conference speakers are always well-respected members of their field, and have valuable insights to share with the audience. The 2016 conference featured addresses from the Financial Conduct Authority, Savills and The Times (alongside other representatives from the financial and real estate sectors). These speakers were able to offer a wide scope of insight into the development of short term lending, with each providing their own unique input and takeaway for attendees.
Given that the ASTL condenses much of the speaker’s speeches into its newsletter and the event is widely covered by the media, you could be forgiven for thinking that actually attending the conference adds little value. However, it’s important to note that any summarisation will by necessity omit a large amount of detail; a forty five minute speech can only be reduced into a one-page article by compressing a great deal of meaning, leaving only the most salient points remaining. Each writer will put their own distinctive filter on the article, meaning that the finished piece only ever reflects part of the speaker’s true meaning; the only way to get the speaker’s full meaning is to actually attend the conference.
As a platform for outside organisations to address the short term finance industry these conferences also provide a valuable service, giving regulatory bodies such as the FCA a chance to directly voice their opinion of the industry. At the 2016 conference, the FCA representative made use of the opportunity to remark how impressed they were with the standard of regulated lending, but that they were concerned at how much dealing was unregulated. This useful channel for feedback means that organisations from outside the ASTL are able to provide useful information on their own positions, as well as recommendations and advice to the industry. Like the FCA, Savills also took the opportunity to outline the state of the UK real estate market in the wake of the Brexit vote; as many bridging loans are used in the real estate sector, this is a subject of great concern to ASTL members.
Another key aspect of the conference which can’t be gained without attending is the opportunity to meet and engage with other members of the industry. There are dedicated networking sessions scheduled throughout the conference, which grants ample time for members to mix and mingle with representatives from related industries, and it’s not just short term lenders who are in attendance; businesses with a strong interest in the state of the bridging finance industry also send representatives, which allows attendees to gain valuable perspectives from businesses outside of their own profession.
As previously mentioned, the state of the UK economy is heavily influenced by that of its financial institutions, and to ensure their ongoing stability the Government has entrusted various organisational bodies with regulatory oversight. The Bank of England is the economy’s primary safekeeper, and it bears responsibility for the overall protection and direction of the nation’s fortunes. In 2014, the Bank of England established several subsidiary bodies to regulate the industry: the Financial Conduct Authority, the Financial Policy Committee and the Prudential Regulation Authority. The FCA is the organisation most heavily involved with the short term lending industry, and as such the ASTL has established close ties with it.
These three organisations were established to enhance the resilience of the UK financial system, and have been largely successful in restoring consumer confidence. The great deal of power which the FCA has to influence policy can potentially result in reforms that damage the industry, however; as a relatively new organisation overseeing a relatively new business sector, there is always scope for misunderstandings to arise, which is part of the reason why the ASTL works closely with the FCA to establish beneficial regulations. Since the two organisations have common goals, they’re able to work together and determine what regulations are best suited to the short term finance sector, and what will ensure stability and security without restricting brokers.
Since its creation, the ASTL has proven to be a valuable asset to the short term lending community as a whole, fulfilling its stated objectives to improve the standards of trading within the industry and to bring the bridging finance industry together for mutual benefit. The UK economy (and short term finance) has benefitted greatly from its work, but maintaining the economy’s health is an ongoing task. With the global economy still in turmoil and Brexit looming in the near future, the ASTL is set to be an important force in the UK’s economy for years to come.