The Bankwatch

Tracking the consumer evolution of financial services

P2P Lending catches up with Canada


This from the FT highlights the direction of P2P lending is closing in on the direction set in Canada in 2008.

His frustration stems from the consultation paper published just over a week ago by the Financial Conduct Authority, which proposed placing the same restrictions on peer-to-peer lenders that already apply to high-risk platforms, such as equity crowdfunding sites. 

This would mean that to invest in peer-to-peer loans, investors would in future have to be certified as sophisticated, be very wealthy, be advised by an authorised person, or certify they will not invest more than 10 per cent of their net assets. 


Basically the direction says that P2P cannot be made available to regular people becase they are not capable of evaluating the risk due to their inexperience with investing.

i would never challenge that direction.  I would challenge that “sophisticated” investors are capable.  Credit risk judgement is a science and not something easily learned.

Alternatively the regulators are suggesting that sophisticated investors are sufficiently well diversified in their investments that they can absorb the risk of P2P Loans going to zero.  If that is the case why do the regulators not require a diversifcatoin policy for sophisticated investors?  Once you start this type of prescritoive regulation it never ends.

if the final answer is that “sophisticated” investors are sufficiently wealthy to absorb any portfolio loss, that is a fair point.  However it suggests that “non-sophisticated” investors should be restricted not just from P2P, from many other investment types, such as real estate, film, etc.

It is not a convincing argument to restrict P2P.

Written by Colin Henderson

August 5, 2018 at 23:22

Posted in Uncategorized

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