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Peer-‐to-‐Peer Lending and the P2PFA
Sam Ridler Execu:ve Director P2PFA
UK Alternate Finance Market 2013
P2PFA Cumula:ve Lending Data
Risk Profile P2P Lending vs Equity Crowdfunding
Bank Deposits
High risk Low risk
Equity Crowdfunding ‘Between 50-‐70% of early stage investments may completely fail and investors on this basis would lose 100% of any money invested’ – FCA 2013
P2P Lending Is classed as a ‘lower risk’ category of investment by FCA. Loan default rate on P2PFA member plaVorms less than 1.5%
Diagram of structure of P2P plaVorm
Borrowers Credit worthy
borrowers
Investors/ Lenders
PlaVorm’s responsibility
P2PFA Membership Criteria P2PFA Members must: • Undertake debt based retail financial services business in the UK by means of an electronic plaVorm
• Have been transac:ng business in the market for at least 6 months • Use lender funds to provide loan funding of any type to consumer or business customers
• Preferably, secure some lender funds from retail consumers • Operate to a significant extent by means of direct loan contracts between borrowers and lenders
• Demonstrate high standards of loan underwri:ng and credit and opera:onal risk management
• Demonstrate high standards of transparency and provide clear, balanced and fair informa:on to all customers
• Comply fully with the P2PFA’s Opera:ng Principles
P2PFA Opera:ng Principles 1. Senior management responsibili:es 2. Minimum opera:ng capital requirements 3. Segrega:on of par:cipants’ funds and audi:ng of the segregated bank
account 4. Appropriate credit and affordability assessment 5. Appropriate an:-‐money laundering and an:-‐fraud measures 6. Clear rules governing use of the plaVorm, consistent with these
Opera:ng Principles 7. Marke:ng and customer communica:ons that are clear, fair and not
misleading 8. Secure and reliable IT systems 9. Fair complaints handling 10. The orderly administra:on of contracts in the event a plaVorm ceases to
operate
Structure of P2PFA
Independent Chair Chris:ne Farnish CBE
Management commibee of Member PlaVorm’s CEOs
Execu=ve Director Sam Ridler
P2PFA Membership
Members Prospec:ve Members
Monitoring Enforcement
Thoughts on EC code of Conduct
P2PFA Monitoring P2PFA Enforcement*
By the Associa:on, member plaVorms, non-‐member plaVorms, third party organisa:on and Industry bloggers
Cau:on from the Chair Suspension and/ or Expulsion *Breaches of FCA regula:ons reported to FCA
Opportuni=es Challenges
-‐ Improve consumer confidence -‐ Level the opportunity to provide
diversity across EU Lending market and provide new asset class to EU retail investors
-‐ Propor:onate approach to harmonising approach across EU
-‐ Code has to be specific to type of finance lending or equity
-‐ Must be func:onal to mul:ple territories with different regulatory requirements
-‐ Iden:fying the best governance for control & monitoring of code
-‐ Ensuring compliance with code is valued by EU consumers & the Industry
Control and monitoring of P2PFA Principles
Key points • The P2P sector is disrup:ng the tradi:onal Oligopolies in retail investment, consumer and businesses lending
• P2P lending largest form of alternate finance and provide vital access to finance for SME
• Sustainable P2P plaVorms perform thorough due diligence on borrowers to ensure they offer low risk returns to investors
• P2P Lending and Equity crowdfunding are very different asset classes with different risk profiles for investors therefore an effec:ve code of conduct cannot be the same for both.
