Bankability

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When did “bankability” become a thing?
It’s a simple concept. An asset or investment is bankable if a bank will finance it without seeking equity. Bankability is all about risk and trust.

The Hollywood star system has long made casting decisions based on this characteristic. Jennifer Lawrence is bankable. Mark Hamill, 1983 to 2013, not so much.

In today’s big time renewable industry, bankability is a big deal. The investment fund manager is looking for a bankable wind or solar project. The project developer wants a a good location and a feed in tariff or locked in financial instrument so she can offer the fund manager a 15 year cash flow that beats our low-low interest rates. And the boys in the bankability department at the local bank base their lending decisions on their interpretation of… bankability.

Bankability seems like a good idea, a measure of project confidence in an industry that required big capital investments.

But wait a second. Was it not the banks who required the bail outs during the crash? What legitimacy have we given them to decide what investments, assets or capital projects are bankable or not?

And in allowing the banks make the bankability call, do we further enhance their legitimacy as gatekeepers of big decisions in society?