In the wake of the financial crisis, much of the small business lending market saw traditional banks stepping away, leaving room for alternative lenders to take their place. The trend saw some placing the blame of the SME funding gap on these traditional lenders. But recent statements from Gary Cohn, president of Goldman Sachs, suggest it’s federal regulation that caused the small business lending squeeze.
[bctt tweet=”The president of Goldman Sachs says federal regulation caused the SME lending squeeze.”]
Reports late last week by Bloomberg spotlighted Cohn’s remarks made at the Institute of International Finance meeting held in Peru on Friday (Oct. 9).
“Liquidity provided by the central banks is now being trapped into the banks because of the increasing capital and regulatory requirements,” Cohn said.
According to reports, Santander Chief Executive Officer Jose Antonio Alvarez also spoke on the panel and similarly agreed that government red tape is hampering small business loan underwriting.
Goldman Sachs has been taking strides to heighten its operations for the small business sector this year.
In June the bank was said to have hired Discover Financial Services Executive Harit Talwar as Goldman established a team to guide its path toward taking a greater share of the SME banking market. Unnamed sources told The Wall Street Journal at the time that the group would soon be presenting its strategy to upper-level executives.
But exact details of Goldman Sachs’ plans to step into small business banking are scarce, and industry players told the publication that they were a bit perplexed at the decision.
While Goldman Chief Executive Lloyd Blankfein did not mention small business finance specifically at the firm’s annual meeting last May, he did say that the bank would need to flex “new muscles” in an effort to attract new customers and enter previously untapped markets.
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