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Post by jackpease on Sept 7, 2016 9:12:50 GMT
fwiw - my observations are....
1/ New rules and regs will probably burden the good platforms and be ignored by the bad
2/ New rules and regs will turn p2p into ersatz banks
3/ You can create as many barriers and warnings as you like for 'naive' investors imagining that 12% is risk free but they will still cry foul when they lose money and expect everyone else to compensate them
So I am slightly concerned at the ever growing wish list being created here!
Jack P
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shimself
Member of DD Central
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Post by shimself on Sept 7, 2016 10:44:07 GMT
The law may be an ass, it doesn't make it a bad idea. My personal view is "skin in the game" is a terrible idea. Platforms are thinly capitalised and would not survive meaningful losses. Platform risk would go through the roof. ... Let's say a platform has 3% of every loan, more or less their take in listing and success fees. If they have meaningful losses then so does their average lender, in which case we don't want them to survive.
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Post by propman on Sept 7, 2016 11:30:56 GMT
My personal view is "skin in the game" is a terrible idea. Platforms are thinly capitalised and would not survive meaningful losses. Platform risk would go through the roof. ... Let's say a platform has 3% of every loan, more or less their take in listing and success fees. If they have meaningful losses then so does their average lender, in which case we don't want them to survive. Great so long as it is others money that is tied up while the platform is closed down and the unproven "living will" implemented. Personally I would rather platforms weather bad financial conditions than die as a result of them. I am also concerned that forcing the platform to invest capital at a similar rate to the Banks prior to GFC, would reduce rates to lenders by far more than any value created for them.
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Post by mrclondon on Sept 7, 2016 11:53:52 GMT
Whilst I can understand the thought process that says there should be a better alignment of interests between platform and lenders, it is hard to formulate a policy that achieves that aim whilst guaranteeing the survival of the platform and an income to platforms for them to be able to recover delinquent loans. For example a simple alignment of interests is for platform's fees / interest to be subordinated behind both lenders's capital and interest. But that would mean on most delinquent loans they would receive no income, which would lead to a model where platforms charge lenders upfront fees to perform the recovery on delinquent loans.
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Post by easteregg on Sept 7, 2016 11:57:57 GMT
The law may be an ass, it doesn't make it a bad idea. My personal view is "skin in the game" is a terrible idea. Platforms are thinly capitalised and would not survive meaningful losses. Platform risk would go through the roof. Unless you want the FCA to make the platforms more like banks, with sufficient regulatory capital to support their share of losses? They would need a lot of capital relatively speaking, because the platforms are much less diversified than the banks. If it could be found (doubtful), it would be very expensive. Or I suppose they might buy insurance, ditto. I believe "skin in the game" is not ideal and I did write a small blog on it on 18th August ( blog.p2pmoney.co.uk/skin-in-the-game). I would be interested to know how companies address the issue that they are not "lending in the course of business".
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Post by dualinvestor on Sept 7, 2016 12:07:27 GMT
My personal view is "skin in the game" is a terrible idea. Platforms are thinly capitalised and would not survive meaningful losses. Platform risk would go through the roof. Unless you want the FCA to make the platforms more like banks, with sufficient regulatory capital to support their share of losses? They would need a lot of capital relatively speaking, because the platforms are much less diversified than the banks. If it could be found (doubtful), it would be very expensive. Or I suppose they might buy insurance, ditto. I believe "skin in the game" is not ideal and I did write a small blog on it on 18th August ( blog.p2pmoney.co.uk/skin-in-the-game). I would be interested to know how companies address the issue that they are not " lending in the course of business". Lending in the course of business is a concept mainly applied for consumer credit, generally it does not apply to business loans over £25,000, therefore if platforms are lending more than that sum to limited companies it is not something that they will have to exercise their minds on. This will mean, by number, most of the platforms will not have considered it. Although of course by volume of loans it could be a factor especially for Zopa and Ratesetter if that is what their business practise is.
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shimself
Member of DD Central
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Post by shimself on Sept 7, 2016 15:36:38 GMT
Thanks for the blog post. As you say it might put a platform out of business if they make too many bad loans - which I maintain is a good thing. You also pointed out that Wellesley do this (to which I would add some intermediaries on Mintos, Twino, and MT). In all these cases the spread between what the borrower is paying and the lender is very large. 2 introducers (sponsors) on TC also do this every time, F&P in varying amounts and I think they allow themselves to flog off aloan if they feel they should - although how they think they can do this without "insider trading" I don't know. Capital Engine do it systematically (and I look at their loans very favourably). Well if the bu****s won't all put their money where their mouth is, I think there is space for someone to make it a feature. FK come to mind, they can get capital, it's the right space (SME lending). For a platform to do this they essentially have to give up sort of 9 months listing and success fees, as a cashflow hit (not a P&L hit), in fact of course after 2 or 3 years they should be in profit because of the interest earned, even if this didn't bring them hoards of extra lenders - offset it against the costs of acquiring customers through advertising and it becomes even cheaper. No, the only reason not to do it is because they don't have enough belief in their own product. Andif they think it's too much of a risk .for them to invest in the loans they want us to invest in well, case closed. They aren't sincere
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ramblin rose
Member of DD Central
“Some people grumble that roses have thorns; I am grateful that thorns have roses.” — Alphonse Karr
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Post by ramblin rose on Sept 8, 2016 12:23:36 GMT
As some of you will already be aware, the FCA is currently reviewing its regulation of P2P lending and equity crowdfunding platforms, and their call for input published in late July has been discussed on a previous thread. The FCA have now approached the forum directly to try to understand what risks forum members see for investors on such platforms. They have said they will value some first-hand insights into how the crowdfunding market works from an investor perspective and believe that we are likely to spot emerging problems first. If you would like to provide evidence to the FCA’s policy team about their regulation of crowdfunding platforms, and what you think needs to change, you can email directly to crowdfundingcfi@fca.org.ukFor a sense of the issues that the FCA is concerned about, you can read their Call for Input here. However, you don’t need to respond to the specific questions in the paper – you can focus on whatever you think is most urgent, e.g. • Are there investment opportunities on p2p lending or equity crowdfunding sites that are unsuitable for anyone without substantial knowledge, experience and expertise? • What specific changes could the FCA make to the rules that the platforms are subject to, to help increase your confidence in the sector? Finally, if you have evidence of specific cases where platforms are acting inappropriately, you can use the same email address to report this to the FCA. Remember that many of these platforms are still in the process of being authorised; if you have any evidence that the FCA should take into account in assessing firms for authorisation, consider sending this to them. Just a quick reminder that the FCA's Call for Input web page requested that comments are received by Thursday 8th September. Anybody who wants their say needs to get their skates on - today's the day. Although I don't personally have the concerns that many of the posters in this thread have expressed and felt I had nothing much to add, I decided to send a response as it would give a very skewed view of lenders' thoughts on the sector if only those with concerns expressed a view. I'm hoping others of the silent majority might do likewise 
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Post by dualinvestor on Sept 8, 2016 12:33:16 GMT
I'm hoping others of the silent majority might do likewise The only certain thing about the silent majority is that they are just that. No-one has any way of knowing whther they agree with these concerns, disagree with these concerns or, indeed, know anything about them. Rather like the 18-24 year olds who claim the older generation voted them out of Europe when actually only 25% of their cohort bothered to turn out.
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Post by propman on Sept 8, 2016 12:40:57 GMT
Thanks for the blog post. As you say it might put a platform out of business if they make too many bad loans - which I maintain is a good thing. You also pointed out that Wellesley do this (to which I would add some intermediaries on Mintos, Twino, and MT). In all these cases the spread between what the borrower is paying and the lender is very large. 2 introducers (sponsors) on TC also do this every time, F&P in varying amounts and I think they allow themselves to flog off aloan if they feel they should - although how they think they can do this without "insider trading" I don't know. Capital Engine do it systematically (and I look at their loans very favourably). Well if the bu****s won't all put their money where their mouth is, I think there is space for someone to make it a feature. FK come to mind, they can get capital, it's the right space (SME lending). For a platform to do this they essentially have to give up sort of 9 months listing and success fees, as a cashflow hit (not a P&L hit), in fact of course after 2 or 3 years they should be in profit because of the interest earned, even if this didn't bring them hoards of extra lenders - offset it against the costs of acquiring customers through advertising and it becomes even cheaper. No, the only reason not to do it is because they don't have enough belief in their own product. Andif they think it's too much of a risk .for them to invest in the loans they want us to invest in well, case closed. They aren't sincere We will have to agree to differ. however, I would be very surprised if VCs were happy to put up capital for an expected return the same as P2P loans. As a result, while there would not be a P&L hit (so long as no loan defaulted), there would be a net outflow after returns to the shareholders are considered that would need to come from lenders (as borrowing rates are largely set by the larger mainstream competitors). In addition, the VCs work on a model of investing a small amount in a large number of customers to limit the losses from each one that fails to meet their hopes. As a result, it might be difficult to get them to fund the increased capital even if the return was, on paper, attractive.
- PM
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Post by propman on Sept 8, 2016 12:45:58 GMT
The only certain thing about the silent majority is that they are just that. No-one has any way of knowing whther they agree with these concerns, disagree with these concerns or, indeed, know anything about them. Rather like the 18-24 year olds who claim the older generation voted them out of Europe when actually only 25% of their cohort bothered to turn out. From experience of previous consultations, the number of individuals replying is very rarely close to 3 figures, so you can read "silent" to mean vocal but have not yet done so! They usually publish the number of responses, so we will see how widely this was responded to in due course. You can be fairly sure that major competitors will stick their oar in!
- PM
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Post by dualinvestor on Sept 8, 2016 12:57:10 GMT
The only certain thing about the silent majority is that they are just that. No-one has any way of knowing whther they agree with these concerns, disagree with these concerns or, indeed, know anything about them. Rather like the 18-24 year olds who claim the older generation voted them out of Europe when actually only 25% of their cohort bothered to turn out. From experience of previous consultations, the number of individuals replying is very rarely close to 3 figures, so you can read "silent" to mean vocal but have not yet done so! They usually publish the number of responses, so we will see how widely this was responded to in due course. You can be fairly sure that major competitors will stick their oar in!
- PM
You miss the point of my post, Rambling Rose seemed to suggest that the silent majority were of the same opinion as herself, i.e. content. I pointed out we do not know their opinion because they are silent. I fully accept that, generally, only a few people respond to such "consultations," whilst it would not make a significant difference despite being an avid reader of the Financial Times and listener to the BBC I was only aware of this one because of membership of this board. Therefore lack of publicity/public knowledge could be a major reason for such low participation.
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Sept 8, 2016 13:08:00 GMT
The only certain thing about the silent majority is that they are just that. No-one has any way of knowing whther they agree with these concerns, disagree with these concerns or, indeed, know anything about them. Rather like the 18-24 year olds who claim the older generation voted them out of Europe when actually only 25% of their cohort bothered to turn out. Im afraid that stat has been revised now www.theguardian.com/politics/2016/jul/09/young-people-referendum-turnout-brexit-twice-as-high
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Post by lb on Sept 8, 2016 13:14:52 GMT
FCA
Please can all platforms be "interim" authorised immediately upon application in the spirit of UK law of innocent until proven guilty. To level the paying field between those that applied 2 years ago and those that applied after that cut off point.
Please remember we are dealing with web-based businesses here i.e. very clearly in the public eye and therefore very accountable to its customers. We are not dealing with secretive back street operations that can last very long or reach any scale doing anything too naughty. Any new platform gets vigorous attention on this forum and picked apart, reviewed and challenged.
Your regulation/oversight is welcomed but let's call a spade a spade - you are taking far too long to do it and massively hindering competition and growth.
Thanks
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Post by dualinvestor on Sept 8, 2016 13:26:13 GMT
FCA Please can all platforms be fully authorised immediately in the spirit of UK law of innocent until proven guilty. Please remember we are dealing with web-based businesses here i.e. very clearly in the public eye and therefore very accountable to its customers. We are not dealing with secretive back street operations that can last very long or reach any scale doing anything too naughty. Any new platform gets vigorous attention on this forum and picked apart, reviewed and challenged. Your regulation/oversight is welcomed but let's call a spade a spade - you are taking far too long to do it and massively hindering competition and growth. Thanks So are you suggesting that everyone should be given a full driving licence at 17? Anyone should sell alchohol without having to ontain a licence? Build a house wherever they wish? A large number of these platforms are very small, start up companies with unproven management, it would be IMO foolhardy to give them full authorisation without following due process. Your assertion is based upon the delay being caused by slow work on the part of the FCA, how do you know they don't have reasons, regulatory or otherwise for witholding authorisation?
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