Lord Turner former head of FSA stated yesterday
"The losses on peer-to-peer lending which will emerge within the next five to ten years will make the worst bankers look like absolute lending geniuses."
Sacha Bright, CEO of FCA approved Crowdfunding aggregator, has responded that he sees Lord Turner’s comments as irresponsible and biased. But perhaps that should be expected from a board member of a challenger bank. The real geniuses here could be considered to be the alternative platforms that aren’t taking the risk of lending out money that they don’t actually have! Remember the banking crisis?? not so genius at all..
Lord Turner continues his attack on the market with a further tirade of false accusations sparking outrage from many alternative lenders, and with good reason! Making throwaway comments like that is dangerous. The P2P industry supports entrepreneurs that have been turned away from the banks and promotes a diverse marketplace to cater to the needs of a broad range of individuals and SME’s. Also, it cannot be stressed enough that they only lend money that they already have in the bank.
‘How can we expect SME’s to prosper in an economy where they have little access to the finance they need. P2P has created a whole new market and for Lord Turner, whose voice is heard, to give such a biased and derogatory view of the industry is quite frankly, completely irresponsible,’ comments Bright.
‘We are talking about a market where many are regulated, where the majority of lenders are operating robust credit assessments, with low default rates, and where many loans are secured against assets. Investors are told up front about the risks involved. The larger P2P lenders do not lend to start-ups, Funding circle and Ratesetter require you have been trading for set period of time, whilst Wellesley secure their debt against property.’
He acknowledges that there are Alternative lenders that do start ups but these loans are usually secured or backed by wealthy individuals and if these people lose their money it does not have such a catastrophic effect on the economy. If a bank fails, we all lose our money. To compare a crash in the P2P market to the fallout created by a banking crisis is pretty ridiculous.
‘Let’s also not forget what a broad and diverse marketplace this is! We have small alternative lenders on our site like Portman Finance and HNW lending who are groups of high net worth successful business men fed up of getting very little interest from mainstream banking that have decided to lend their own money. They understand the deal, they know the market as they have done it themselves and they do things differently. HNW will secure loans against a variety of unusual assets!’ says Bright.
His comments just show how distant he is and out of touch from the complete industry. Yes, the worst bankers could be deemed geniuses, they crashed a market, the government bailed them out and they remained super rich! The economy didn’t fare so well however.
The P2P market allows the individual to take their own risks and to do what THEY want with THEIR money...
Overall, Sacha bright concludes, ‘Lord Turner is feeling the heat from the competition.’
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