Taxi drivers and medallion owners are not the only ones feeling the impact of new competition brought on by ride-sharing companies like Uber Technologies Inc. and Lyft Inc. These disruptive technologies are also affecting the myriad of lenders to taxi medallion holders, including financial institutions, which are not only seeing the value of the medallions they underwrote at all-time-high prices plummet but, simultaneously, and perhaps even more importantly, are also experiencing an increase in credit risk. Understanding how depreciating medallion prices are driving this risk and what this risk means, especially for creditworthiness, is an essential first step in developing effective rules, regulations and business tactics that can foster an environment conducive to the future stability of the midsized-bank and credit union lenders.
To assess the impact on these lenders to the taxi medallion industry, in this paper, Global Risk Services conducted an assessment of a select number of institutions’ creditworthiness using S&P Capital IQ’s Bank Scorecard. Standing out on the list is Montauk Credit Union, which suffered the biggest drop in credit quality, according to our Credit Assessment Scorecard analysis, with nearly 30% of its outstanding loans issued to the taxi medallion industry.