February 06, 2016

When financing art, should Old Masters be credit rated based on their value volatility?

Sir, I refer to John Dizard’s discussion of “the business of lending against art collateral”, “Art world may be struggling but lenders are still happy to rely on an Old Master” February 6.

Dizard writes about a “an avalanche of loan applications from Europe” but “the banks that made lending facilities available in the past are not doing so any more” because the banks “are under tremendous regulatory pressure. Every European bank is scrambling for sufficient capital.”

It is a very interesting article. But, sincerely, should FT not be much more concerned with all the financing of SMEs and entrepreneurs that is not happening in Europe for precisely the same reasons… namely that capital scarce banks are allowed to hold much less capital against assets ex ante perceived or deemed as safe?

That said… might there be room for credit rating of art? That could allow banks to hold less capital against some Old Master that possesses less value volatility. Or would that only incentivize the production of more AAA rated Leonardo Da Vinci fakes?

@PerKurowski ©