March against FCA failures 24th May

I should have finished my teeny tiny project about the FCA by the 24th...

Thanks for your thoughts.

The study you've linked to is fascinating. Appreciate you sharing it.

The conclusion states: "It seems that the companies are more interested in attracting borrowers, even at the expense of not meeting lenders’ expectations."

Also: "The current study shows that P2P companies encourage borrowers, thereby increasing the risk inherent in lending money to strangers. This pattern could explain the negative connection we found between the amount of the loan and the level of interest rates. While former studies argued that larger amounts are a greater risk to lenders, we found that companies actually encourage borrowers to borrow large amounts by reducing the interest rate. This indicates a lack of connection between the companies operating in the P2P industry and their lenders’ needs."

This emphasises what all seasoned P2P lenders know, that the P2P platforms are more interested in drawing in and sucking up to borrowers than "meeting lenders' expectations". 

As for your remark that the regulator does a "decent job", I would very much disagree. As somebody who has had very many dealings with the FCA over the years because I've been taken for a ride by borrowers and borrowing platforms, the level of the FCA's abrogation of their responsibilities and their incompetency is beyond the pale.

For instance, it's only when UK P2P platforms go into Administration that it comes to light that almost each and every single one of them was run shockingly abysmally in 1001 ways, that the loans was horrendously mishandled, that hundreds of thousands or millions of pounds went 'missing', that the Directors were inept or outright fraudulent, and that the platform's heavily-advertised "robust wind-down plans" are about as useful as a chocolate teapot.

Time and time and time again.

This e-mail was sent by a FCA Risk Manager in December 2016:


I would only expect good professional investors and risk managers to see P2P as a sum of different economically justified risks and then additional profit on top of that (that in a competitive and fair market would be zero! But which ones seeks to exploit in the meantime). Most will be clueless.



So this is an ideal way for the FCA to tests viability, distinguish good from bad innovation, test whether sectors meet our objectives, measure our risk tolerance and so on. The problem is we have yet ourselves to adopt these well-known industry practices for these purposes.

….

There is little sign on the platforms of (2) time value of money or (4) unexpected losses. There is not always a measure of (3) unexpected losses. There is almost no sign of the final three or four issues.



These are huge risk management weaknesses that we need to fix. The problem with doing that using threshold conditions is that there are billions already in this precarious state. …



In the case of P2P the horse has already bolted. So we need a different strategy to manage the firms into a different place. This is not going to be easy.