Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Business, Energy and Industrial Strategy:
To ask Her Majesty's Government whether default rates, and losses in event of default, experienced by the British Business Bank on loans sourced through peer-to-peer lending platforms have been (1) greater or lesser than for the British Business Bank’s overall lending book, and (2) greater or lesser than the British Business Bank’s expectation when extending loans through such platforms.
Answered by Lord Callanan - Parliamentary Under Secretary of State (Department for Energy Security and Net Zero)
The British Business Bank’s participation in peer-to-peer lending platforms has been primarily through the Bank’s commercial subsidiary British Business Investments. Data collected across the Bank’s programmes and delivery partners is consolidated on a programme-by-programme basis. The Bank does not record an overall rate of default given the wide range of delivery partners and products across the Bank’s programmes that are not directly comparable.
British Business Investments monitors existing delivery partners and their performance against contractual requirements, which includes monitoring the level of defaults, provisions, impairments[1] and write-offs observed through the life of each investment.
The level of default rates observed on the portfolio of loans generated through the peer-to-peer lending platforms have varied over the life of the investments to date, at times being below and at times being above the initial expected rate at the time of investment. Provisions are raised for defaulted loans but the actual level of losses associated with these defaults will be dependent on the level of recoveries achieved through the life of the investments as not all defaults will result in crystallised losses.
The level of losses provided for as a percentage of the net amount invested across the peer-to-peer platforms loan portfolio, is above the overall blended level[2] for the British Business Investments’ portfolio. This is as expected given the different risk profile and structure of the investments across the portfolio, all of which have been assessed within the Bank’s objectives and programme criteria.
Overall returns from investments through the peer-to-peer platforms have been positive and the Bank has not experienced any negative returns from the peer-to-peer platform investments liquidated to date.
[1] An impairment is an adjustment applied by a fund manager where a performance issue has been identified within a specific investment and are therefore included in the Net Asset Value submitted to the Bank.
[2] This includes the level of defaults, provisions, impairments and write-offs provided by peer-to-peer and non-peer-to-peer delivery partners.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Business, Energy and Industrial Strategy:
To ask Her Majesty's Government whether the value of new loans extended by the British Business Bank sourced through peer-to-peer lending platforms has (1) increased, or (2) decreased, over the last three completed financial years; and what percentage of such loans were to borrowers who had already received funding from the British Business Bank.
Answered by Lord Callanan - Parliamentary Under Secretary of State (Department for Energy Security and Net Zero)
The British Business Bank’s participation in peer-to-peer lending platforms has been primarily through the Bank’s commercial subsidiary British Business Investments. Data collected across programmes and delivery partners is consolidated on a programme-by-programme basis.
The value of new loans extended by the British Business Bank sourced through peer-to-peer lending platforms has increased year-on-year over the last three completed financial years.
Over the three year period, of the 15,420 distinct SME customers that have received financing through the peer-to-peer delivery partners of British Business Investments, 9.36% have been to repeat peer-to-peer customers[1]. The Bank does not hold data on how many peer-to-peer customers may previously have benefitted from other British Business Bank programmes.
[1] This data excludes finance through Market Invoice as a single customer could have multiple invoices funded through the platform at a time.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Business, Energy and Industrial Strategy:
To ask Her Majesty's Government what assessment they have made of the (1) report by the Institute of Accountants in England and Wales into the insolvency of Comet Group and the losses sustained by HMRC, published on 31 January, and (2) implications, if any, for the (a) collapse of Monarch Airline, and (b) request for governmental financial support from Flybe and its immediate and ultimate owners.
Answered by Lord Callanan - Parliamentary Under Secretary of State (Department for Energy Security and Net Zero)
The Government is aware of the findings of the investigation by the Institute of Chartered Accountants in England and Wales (ICAEW) into the conduct of the administrators of Comet Group Limited and the resulting consent order setting out the disciplinary action taken. The Government supports the aims of the regulatory framework for insolvency practitioners and the Government’s Insolvency Service works closely with the Recognised Professional Bodies, such as the ICAEW, in ensuring appropriate action is taken when needed following an insolvency. Regarding Flybe, it would not be appropriate for Government to comment on the speculation as to its financial affairs.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Business, Energy and Industrial Strategy:
To ask Her Majesty's Government how much the British Business Bank lent through peer-to-peer lending platforms in each of the last two financial years; and whether the British Business Bank continues to provide loans to new borrowers through peer-to-peer platforms or whether loans are now confined to supporting previous borrowers sourced through peer-to-peer platforms.
Answered by Lord Callanan - Parliamentary Under Secretary of State (Department for Energy Security and Net Zero)
The British Business Bank does not lend directly to SMEs. The Bank’s total exposure through peer-to-peer delivery partners was:
· £101.3m at 30 September 2019 (the latest data available), and
· £102.9m at 31 March 2019.
The Bank’s exposure contributes to loans to SMEs. In combination with other funders, the new loans it supported through peer-to-peer platforms were as follows:
· £268.7m of new finance to 2,738 SMEs in the six months to 30 September 2019 (the latest data available), and
· £705.4m of new finance to 7,794 SMEs in Financial Year 2018/19.
The Bank’s exposure to peer-to-peer delivery partners continues to provide finance to new SME borrowers.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Business, Energy and Industrial Strategy:
To ask Her Majesty's Government, further to the Written Answer by Lord Duncan of Springbank on 28 January (HL579), whether the confidentiality agreements cover the aggregation of data for a number of unidentified peer-to-peer platforms; whether the same wording is included in all agreements with peer-to-peer platforms; and whether this wording is proposed by the Government or the peer-to-peer lender.
Answered by Lord Callanan - Parliamentary Under Secretary of State (Department for Energy Security and Net Zero)
Confidentiality agreements between the British Business Bank and peer-to-peer lenders do not deal with aggregated data relating to multiple different platforms. The British Business Bank does not aggregate peer-to-peer data from different platforms for reporting purposes. Given the very small number of peer-to-peer platforms we invest in, we could not publish aggregate default rates without compromising confidentiality in relation to individual platforms. In keeping with our commercial approach, we do however continually monitor the market and carry out extensive due diligence on any peer-to-peer lender before entering any commercial agreement with them. Once an arrangement is in place, we receive regular data on the performance of our loan book to ensure that this is in line with the contractual expectations we have made with them.
Different confidentiality agreements between the Bank and peer-to-peer delivery partners do not contain the same wording. The wording of each individual agreement is agreed jointly by the British Business Bank and the individual peer-to-peer lender, but they reflect delivery partner expectations, as is standard in the market.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Business, Energy and Industrial Strategy:
To ask Her Majesty's Government what plans they have to address the regional disparities in small business lending, as reported in The Times on 21 January.
Answered by Lord Duncan of Springbank
The Government is committed to levelling up across the whole country so that businesses can access the funding they need to thrive wherever they are.
The British Business Bank (BBB) is a government-owned economic development bank which helps to drive economic growth by making finance markets work better for small businesses, enabling them to prosper and grow. Since BBB was established in 2014, it has supported over £7 billion of finance to over 91,000 SMEs across the UK (as at June 2019) and continues to grow. The stock of finance supported by the bank grew by 31% year on year (from June 2018 to June 2019).
BBB’s Start Up Loans programme has so far provided 69,201 loans worth over £558m to small businesses (at end-December 2019) and has delivered loans in every parliamentary constituency in the UK.
BBB has introduced specific funds and activities to help address regional disparities in access to finance, which are having an increasingly significant impact. These have equity and debt finance components, with the balance of debt to equity set according to the specific needs of the businesses in those regions.
The funds include:
For equity investment, the BBB also has a £100m Regional Angels Programme, which is designed to help reduce regional imbalances in access to early stage equity finance for smaller businesses across the UK (launched in October 2018 by British Business Investments, a commercial subsidiary of the British Business Bank). In September 2019, the first £10m commitment through the programme was made to one of the largest business angel networks in the North of England which primarily operates in the North West, Yorkshire and the North East with more commitments to be announced in the coming year.
The UK Network, established in early 2019 by the British Business Bank is a UK-wide network of relationship managers which will continue to enhance and further build BBB’s relationships with key SME access to finance stakeholders across the UK and thereby help tackle regional imbalances in access to finance, including for smaller businesses seeking debt finance at all stages of their development.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Business, Energy and Industrial Strategy:
To ask Her Majesty's Government, further to the Written Answer by Lord Duncan of Springbank on 28 October 2019 (HL48), whether the decision to classify the default rate of loans made by the British Business Bank via peer-to-peer platforms as commercially sensitive information was to protect (1) the British Business Bank, or (2) the identify of borrowers; and if it was to protect the identity of borrowers, whether they will publish the aggregate value of (a) defaulted, and (b) provisional, loans through peer-to-peer platforms for each of the last three financial years.
Answered by Lord Duncan of Springbank
Data provided to the British Business Bank (BBB) by its delivery partners to meet portfolio monitoring and reporting requirements remains commercially sensitive to the delivery partners and as such is governed by confidentiality agreements. An individual delivery partner may choose to publish data on the overall performance of their loan book, which may include but will not be limited to BBB backed investments. A list of BBB’s delivery partners can be found on their website.
The BBB’s Annual Report and Accounts (“Enabling Small Businesses to Grow and Prosper”) includes information on the BBB’s overall performance and is available on the website
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Business, Energy and Industrial Strategy:
To ask Her Majesty's Government what assessment they have made of the actions of financial and other advisers to Thomas Cook Group in seeking the payment of fees before the Group collapsed; what plans they have, if any, to launch an investigation into such actions; and whether such an investigation will examine whether these actions constituted an act of fraudulent preference to the disadvantage of UK taxpayers.
Answered by Lord Duncan of Springbank
The Business Secretary has written to the Insolvency Service to ask them to prioritize and fast-track their investigation into the circumstances surrounding Thomas Cook going into liquidation.
Under the Insolvency Act 1986, the Official Receiver as liquidator may seek to overturn a range of transactions made prior to the liquidation, for example where preference payments have been made to a creditor/s or where a transaction is to the detriment of creditors.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Business, Energy and Industrial Strategy:
To ask Her Majesty's Government what proportion of loans made by the British Business Bank and sourced from peer-to-peer platforms have defaulted.
Answered by Lord Duncan of Springbank
Since 2014, the British Business Bank has invested over £2.18bn via peer-to-peer platforms, benefitting over 19,617 SMEs (as at March 2019).
The default rate in the British Business Bank’s peer-to-peer platform investments is commercially sensitive information.
Asked by: Lord Myners (Crossbench - Life peer)
Question to the Department for Business, Energy and Industrial Strategy:
To ask Her Majesty's Government whether the British Business Bank independently vets every loan it makes through peer-to-peer lending platforms and similar agencies or relies on such platforms for conducting due diligence.
Answered by Lord Duncan of Springbank
The British Business Bank operates indirectly through various delivery partners. Individual lending and investment decisions are fully delegated to these delivery partners.
The British Business Bank has a thorough delivery partner selection process, which includes robust due diligence. British Business Bank also monitors existing delivery partners and their performance against contractual requirements or Service Level Agreements.