Finance: Peer-to-Peer Lending

Lord Davies of Oldham Excerpts

Wednesday 19th December 2012 Lords Chamber

[Lord Sassoon]

My Lords, these are critical issues. There is a fundamental trade-off between stability in the system, which clearly has to improve over what it was before the financial crisis, and the need to boost growth. The fact that the Financial Policy Committee at the Bank of England is up and running in shadow mode and is identifying the counter-cyclical tools that it will need is a very important new step in this area. The Funding for Lending scheme is, I believe, the most important sign of what can be done with the strength of the Government’s balance sheet. Lower funding costs are already coming in to wholesale bank funding, declining by over 100 basis points since June. One indication of the impact on consumers is that quoted rates on fixed-rate mortgages have declined by 0.3 percentage points since the Funding for Lending scheme has come in. However, I certainly agree that we need to be very attentive to this issue.

[Lord Davies of Oldham]

My Lords, yesterday the Opposition expressed their best wishes to the noble Lord on leaving the Front Bench. In the Treasury team, that Motion was carried by seven votes to one, and I am not quite sure whether I should confess to being the one. Nevertheless, I have enjoyed the cross-Dispatch Box jousting that we have had from time to time and I appreciate the Minister’s skill in replying—often, of course, defending the indefensible. Will he, on this occasion, give us real hope for the future? There is a possibility of very rapid growth of peer-to-peer lending. Is he certain that what will be in place is rigorous regulation of this developing sector? We obviously failed with regard to the banks in the past and there are a lot of anxieties about the new scheme now. This one presents particular challenges and I would like some reassurance from the Minister.

[Lord Sassoon]

I am grateful to the noble Lord, Lord Davies of Oldham. I would not want, on an occasion like this, to point out that the previous Government did not take any policy on p-to-p lending, but it was very small then. These lenders only got into business in 2005. The critical thing is that now, having handed the challenge and the responsibility to the FCA, we will see a draft plan very soon, certainly in the first quarter of the new year, as to what the framework for regulation will be. Draft rules will come in later in the year and, as I said earlier, it is very important that we get the balance right in providing an appropriate degree of regulation, not something that kills off what is likely to be a very fast-growing and important area of activity.