The chief executive of property peer-to-peer lender Assetz Capital Stuart Law said the industry has crossed a “tipping point” and expects “significant” industry closures as new regulator rules come in effect at the end of the year.
His comments come after the fall of Buckinghamshire-based FundingSecure has put £80m of loans at risk threatening 3,500 investors this week. This follows the closure of rival Portsmouth-based Lendy with outstanding loans of more than £160m to some 21,500 investors in May.
And last March, Collateral based in Manchester, fell into administration after trading without a license, putting £21m of investors’ money at risk.
Law said: “The upcoming [Financial Conduct Authority] FCA regulation is intended to crush firms with a lax attitude to investor funds, which is the right thing to do. It will also made it difficult for small firms that don’t have the scale to attract customers, new investors, and money to spend on branding. There will be a significant reduction in the number of peer-to-peer firms over the coming year.”
Many in the industry think a slowing economy, exacerbated by ongoing Brexit negotiations, and tighter rules on the conduct of the country’s 60 or so peer-to-peer lenders in the UK oversaw by the Financial Conduct Authority (FCA), will flush out weaker players in the industry that has amassed outstanding loans of more than £10bn.
Some in the industry say up to 30 players could go to the wall by the end of next year.
He added: “The industry went over a tipping point after investment stalled following the first Brexit extension in March.”
Assetz Capital has lent over £900m to UK small firms since it was founded seven years ago, attracting over 36,000 active investors.
The watchdog announced new rules for the whole of the industry in June, which impose stricter requirements on governance arrangements and other controls it operates under that come into force in December.
One of the more notable new rules is that investors will not be able to risk more than 10 percent of their investible assets in peer-to-peer firms over a 12-month period.
The FCA’s tighter rules in this area, announced in June, come after it emerged Lendy had been on the regulator’s watchlist for six months before it collapsed but failed to warn investors during that time.
LearnBonds.com Editor, Roger Baird, on a matter commented: “Stuart Law’s comments show the industry is indeed at a tipping point. The UK economy is slowing, aggravated by Brexit uncertainty. It seems that these failures among peer-to-peer lenders show the industry, like the retailer sector, is at the sharp end in showing us how strong the UK economy is.”
The full story can be read here: https://learnbonds.com/news/assetz-capitals-stuart-law-new-city-rules-will-lead-to-significant-peer-to-peer-failures/