Lord Adair Turner was speaking to the BBC when he was asked about the outlook for the sector.
“I strongly suspect that 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,” said Lord Turner.
“You cannot lend money to small and medium enterprises, in particular, without somebody going and doing good credit underwriting.
“This idea that you can just automate that onto a platform – I think it has a role to play but, I think, it will end up producing big losses.”
Lord Turner’s comments come after last year’s collapse of Sweden’s TrustBuddy, when investors lost 25% of the cash they had invested with the platform.
John Goodall, CEO of LandBay, criticised Lord Turner’s comments saying they were both misleading and incorrect.
“The peer-to-peer industry is both broad and diverse and to paint it with a single brush stroke as dangerous is ultimately unhelpful for consumers.
“To write off peer-to-peer lending now is to ignore the same innovation which has permanently transformed the global hotel accommodation and taxi industries,” added John.
Christian Faes, Co-founder and CEO of LendInvest, said Lord Adair’s comments were a disservice to the regulator.
“I don’t think we can trust the person who presided over the worst financial meltdown in history to tell us who are or aren’t lending geniuses,” said Christian.
“Having just returned from meeting P2P companies in China, I’ve seen the real P2P Wild West in action.
“The FCA (Financial Conduct Authority) is doing the right thing by regulating our industry.”
Christian conceded that these regulations may cause a shakeout in the industry, but said this would result in a stronger, more confident and more credible sector.
“These comments are self-serving and timed to drum up more sales of Lord Turner’s book on Amazon,” said Christian.
“Surely he is conflicted too - given that he’s now regulator-turned-banker himself.”
Leave a comment