No-one could accuse the platform lending sub-sector of the alternative finance industry of chasing snappy PR concepts. Following the demise of the P2P Finance Association (which only had a handful of big players, anyway) the quango Innovate Finance has announced the launch of a new body 36H.36H is not a clothing measurement, but a reference to a piece of financial-services legislation. Catchy.
The latter part of 2019 has seen, quite rightly, a greater focus on the regulation of process and enhancing transparency requirements in the sector following the failure of peer-to-peer (P2P) platforms such as Lendy. Lendy's failure was linked – completely unfairly – with a number of problems experienced by investors in unregulated investments, notably mini-bonds. The best-known of these failures the London & Capital Finance debacle. It's in the light of these problems that the FCA decided to propose a limit on investor exposure to alternative loan assets.The essence of the FCA's proposal is this: Investors should not commit more than 10 per cent of their portfolio to platform lending (aka P2P). The move comes amid a broader drive towards greater transparency in reporting defaults and bad debts in platforms' loan books, more scrupulous risk management requirements and clarity on dealing with wind-downs in the event of a platform failure.As far as the alternative lending sector is concerned, the 10 per cent limit is actually good news. Consider the figures: