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• 11 Feb

  Lord Turner Predicts Losses From Peer-To-Peer Lending

  In a piece published by the BBC, former city regulator, Lord Adair Turner was quoted as saying "The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the worst bankers look like lending geniuses,". The quote was buried in a piece about interests rates staying low, maybe only 2% by 2020. However, the most interesting quote to me was the one about P2P (peer-to-peer) lending. The article put forward the counter argument, made by Christine Farnish, independent chair of the P2PFA, the industry body representing peer-to-peer lending, who was quoted as saying that Lord Turner's comments "fly in the face of the evidence . . . since the industry began, default on loans are low, measuring between 2-3%,".

  One might argue that the P2P industry has not yet felt the full brunt of a "real" recession. I recall working in invoice finance client management back in the 90's and seeing a quarter of the client book failing almost overnight. So it will be interesting to see how well P2P copes, if and when the economy takes a real downward tilt. The benefit of the invoice finance situation during recession was that the book debts were your security. Providing you had valued them correctly, you could collect out your funding from the sales ledger. Indeed in situations such as factoring, you were actively managing the sales ledger for the client, so the task was even simpler.

  Time will tell no doubt tell who is right.

  You can read the BBC's full article here: http://www.bbc.co.uk/news/business-35537714

  Catalyst have published a response to these comments, asserting their confidence in the risk controls within the alternative finance market. Read their response here: http://catalyst-finance.com/Blog/catalyst-ceo-jonathan-willder-responds-to-lord-turners-comments-published-in-the-telegraph

  By Glenn Blackman