The chairman of the FCA has expressed concerns about peer-to-peer lending which he said was starting to look like banking, with one MP claiming this could be the ‘next big regulatory scandal’.
John Griffith-Jones appeared before the Treasury select committee last week along with acting FCA chief executive Tracey McDermott.
They were asked about the FCA’s work on P2P lending by Conservative MP Chris Philp who said it was likely to be “the next big regulatory scandal”.
Noting that new products and markets always raised questions for the FCA about whether it should intervene, Mr Griffith-Jones said: “While one wants to encourage alternative sources of lending, one doesn’t want to open up to a risk.
“I believe that if we see a development of this, sooner or later these platforms will start to offer packages, and rather than lending directly to Mrs Smith in Brighton they will say: ‘Here’s the default package which spreads the deposit across many of our investors.’
“At that point they become awfully like a bank. It is very important for the regulator not to allow regulatory abritrage in the system.
“What I can assure you is we are not asleep at this wheel; what I can’t assure you is when would be the right moment to intervene.”
According to figures from the P2P Finance Association, more than £500m-worth of new consumer and small business loans were provided by peer-to-peer platforms between April and June.
The session also touched on the much-anticipated report into what went wrong at HBoS, which was commissioned in 2012 to examine the FSA’s supervision of the bank.
Mr Griffith-Jones said he “certainly hoped” the report would be published this year.
The report has been going through a long process of maxwellisation, where individuals named in the report are offered an opportunity to respond to allegations or critical findings before publication.
In April the FCA said in response to an FOI request from Financial Adviser that the report would be completed after the general election to preserve its impartiality.
The TSC also heard that fairness for financial advisers would be a key part of the FCA’s upcoming review of the FSCS levy.
Adviser view
Clayton Cumming, partner in Glasgow-based Advice & Wealth Management Solutions, said: “I have never been involved in P2P lending and I do not think it is appropriate for my client base.
“I have looked at it but I had concerns about the liquidity.”
