Andrew Tyrie MP, chairman of the parliamentary Treasury Committee, has written to Tracey McDermott, chief executive of the Financial Conduct Authority (FCA), and Andrew Bailey, deputy governor of the Bank of England for Prudential Regulation, about whether consumers would benefit from further regulation of the peer-to-peer lending market.
Commenting on the correspondence, Tyrie said: “The Committee is concerned to ensure that the FCA is paying due attention to the risks – and the opportunities – afforded by the growth of peer-to-peer lending and related markets. With this is mind, I have written today to Tracey McDermott to ask for an explanation of FCA policy.
“Government policy – letting peer-to-peer investments form part of an ISA allowance, for instance – represents a form of official support for investments that may be inherently higher risk. Peer-to-peer loans are estimated to have totalled £4.4 billion in the final quarter of 2015 – up from close to zero five years ago.
“Whether and, if so, to what extent investors would benefit from stronger consumer protection now needs careful thought. Poorly informed investors may be left with a false sense of security about the balance of risks versus returns. But greater regulation is not necessarily the answer. If this market can substantially increase competition it may offer benefits to the consumer. It is crucial that the regulator is doing what it can to find the right balance between these risks and opportunities.
“The prudential impact of the financial sector’s increasing exposure to unsecured loans through crowdfunding platforms also warrants closer scrutiny. The sector’s ability to see through an orderly decline should be considered sooner rather than later.”