The ex-regulator who trashed online lending is telling the industry to its face why its flawed

Lord Adair Turner will be one of the keynote speakers at this year’s LendIt Europe peer-to-peer lending conference, the organisers announced on Thursday.

Lord Turner is the former head of the Financial Services Authority, the City regulator before the Financial Conduct Authority took over in 2013. He notably trashed the peer-to-peer lending industry earlier this year, telling BBC radio in February: “The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses.”

Peer-to-peer lending, also known as marketplace lending, is where online platforms match lenders and borrowers directly, cutting out banks and other institutions that usually sit in the middle. These platforms — like Funding Circle, Zopa, and RateSetter — do all the risk underwriting but take no financial risk themselves.

Lord Turner, who was the City’s top watchdog from 2008 to 2013, worries that the fact these platforms are not taking risk themselves means their underwriting standards are not as rigorous or well monitored as banks, which do take balance sheet risk.

It seems unlikely that Lord Turner has had an about-face turn on the sector in the 4-months since his comments to the BBC but his statement on the LendIt appearance is relatively neutral. He says in an emailed statement on Thursday announcing his speech at LendIt:

I am delighted to have this opportunity to speak in more depth about alternative finance, including the fast-growing peer-to-peer lending sector and the opportunities and risks that it may pose as it develops further.

Christine Farnish CBE, chair of the Peer-to-Peer Finance Association which helps organise LendIt, says in the same emailed statement:

Lord Turner is an authoritative speaker on matters relating to financial services regulation and his views on how the opportunities and benefits of peer-to-peer lending can best be encouraged — and risks mitigated — through effective regulation, will be an important contribution to the debate.

Lord Turner’s comments earlier this year hurt the industry and Samir Desai, CEO of Funding Circle, told the AltFi conference shortly after: “I don’t agree with some of the credit assessment stuff and I think many platforms have invited Lord Turner in to view our processes, reassure him, because I think it is important that we tackle this criticism head-on rather than just shout him down.”

The peer-to-peer industry, which was the hottest area of fintech at the start of 2015, has had a very tough start to 2016. As well as Lord Turner’s comments, Deloitte largely dismissed the industry by saying it “will not [produce] significant players in terms of overall volume or share.” Investor confidence in these platforms has also taken a significant hit after the shock exit of Lending Club’s CEO over amended loan terms and non-disclosure.

The LendIt conference will take place in London on October 10 and 11. You can find all our coverage of last year’s conference here.

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