Tyrie asks FCA to consider further P2P regulation

Writing to Tracey McDermott, Chief Executive of the FCA, and Andrew Bailey, Deputy Governor of the Bank of England, Tyrie asked for an explanation of FCA policy.

Tyrie said the Committee is "concerned to ensure that the FCA is paying due attention to the risks – and the opportunities – afforded by the growth of peer-to-peer lending and related markets".

He also raised concerns that the new government policy of allowing peer-to-peer investments form part of an ISA allowance "represents a form of official support for investments that may be inherently higher risk".

Peer-to-peer loans are estimated to have totalled £4.4 billion in the final quarter of 2015 – up from close to zero five years ago.

Commenting on the correspondance, Tyie added: “Whether and, if so, to what extent investors would benefit from stronger consumer protection now needs careful thought. Poorly informed investors may be left with a false sense of security about the balance of risks versus returns. But greater regulation is not necessarily the answer. If this market can substantially increase competition it may offer benefits to the consumer. It is crucial that the regulator is doing what it can to find the right balance between these risks and opportunities.

“The prudential impact of the financial sector’s increasing exposure to unsecured loans through crowdfunding platforms also warrants closer scrutiny. The sector’s ability to see through an orderly decline should be considered sooner rather than later.”