Decentralized finance creating challenges and opportunities for bank and finance clients: Elana Hahn

Lawyer recently joined Fasken's banking and finance group

Decentralized finance creating challenges and opportunities for bank and finance clients: Elana Hahn
Elana Hahn, Fasken

Elana Hahn recently joined Fasken as a partner in the firm’s banking and finance group. In her 20-year career, Hahn has practised in Canada, the US, and the UK, at firms including Norton Rose Fulbright, Dentons, and Clifford Chance LLP. Her practice involves advising clients on securitization, structured finance, and general lending, and has a significant focus on the housing market.

Hahn spoke with Canadian Lawyer about her move, trends in the global economy, and how decentralized finance is creating challenges and opportunities for banking and finance clients.

Answers have been edited for length and clarity.

What are the key trends in your practice?

We're all aware that there's a slowing global economy with predictions of recession for a while now. This is going to continue to be the trend into 2024.

There's a lot going on in the technology area. Things like generative AI, the cloud revolution, and then related risks such as increased fraud and cyber risks. These all present a lot of challenges for our clients and are causing the leaders of financial services firms to be very vigilant and act swiftly.

Developments in the automation of compliance procedures and increased focus on risk management capabilities are also top priorities.

It's a period of societal and economic change, yet that presents some opportunities for progress.

What are those opportunities?

There's an ongoing trend of decentralization of finance. There are more technology-based consumer finance platforms – the so-called fintech sector. There are emerging alternative sources of corporate funding and just general expansion in the non-bank lending sector. This presents challenges for our financial institution clients.

It also presents opportunities in that there are new entrants into the market. For financial institution clients, there are opportunities to develop new products and channels to provide financial services to consumers and companies.

What are the significant regulatory changes in the banking and finance sector?

The main regulatory changes relate to the decentralization of finance. There are more technology-based platforms and many more lenders and providers of credit who are not currently regulated or within regulated financial institutions.

The federal and provincial regulators are constantly introducing new regulations or adjusting the scope of existing regulations. This is going to continue for the foreseeable future. As the new technologies and platforms continue to develop, a large part of my practice is providing legal and regulatory advice on that. It is also doing transactional work and staying abreast of these developments.

You have experience in the US and UK markets, what do you see there?

Similarly to Canada, there's been economic uncertainty for a while now in the US and UK. Things seem to have held up better than expected for longer than expected, but there's anticipation of a recession in all these jurisdictions.

There are also higher interest rates impacting the average consumer’s ability to spend and the cost things like homeowner mortgages.

On the corporate side companies are generally doing less borrowing and fewer acquisitions. Financial institutions in the US and UK are facing a tough operating environment.

There is also a decentralization of finance. We see this in Canada and globally. These trends are amplified during economic downturns.

There is more alternative financing, both in the domestic market but also in the cross-border US and UK markets.

You do debt finance transactions in the housing sector. How have interest rates impacted this part of your practice?

It's had an impact. Interest rate levels are cyclical, and our clients’ operations and priorities are constantly changing. With a record number of rate changes in the last 12-to-18 months, this has been a very significant factor.

With rising interest rates, I'm seeing more activity and transaction developments in alternative financing channels. This includes alternative funding sources. There's a lot more focus on asset-based lending, including companies trying to tap into monetizing more esoteric assets that they have on their balance sheets. In general, clients are looking at creative transaction structures for risk transfer.

The practice has been evolving with our clients. Alternative funding channels are developing to ensure funding accessibility and to make homeownership possible.

Our practice is also very busy with affordable housing financing and the increased focus on the alternative delivery of affordable housing.

What does the future hold for the banking and finance practice?

Financial institutions and non-bank lenders are focused on risk management and operate in a heavily regulated environment. It's important that we provide timely, relevant, and calibrated advice to protect the clients’ interests and to support the adept navigation of their businesses.

So why was Fasken a good fit for you and your practice?

The banking and finance group at Fasken has a very deep, broad and market-leading strength and practice. There's a high degree of alignment in the group and on the direction of my practice, and mutual opportunities to grow.

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