RATESETTER has said that Brexit will have little impact on the day-to-day running of its business, nor its ability to provide great investor returns.
The ‘big three’ peer-to-peer lender highlighted the fact that all of its investors and borrowers are based in the UK and that it is regulated by the Financial Conduct Authority, meaning that “the act of the UK leaving the EU will have very limited impact on the day-to-day operation of RateSetter”.
RateSetter heralded its credit risk management processes and said it is well-placed to deal with Brexit.
“Whatever happens with Brexit, we are confident that RateSetter will continue to provide great returns for you,” the firm said in a blog post on its website.
RateSetter said that changes in the economy tend to be gradual, occurring over a number of months, meaning that it takes time for events such as these to affect borrowers’ ability to repay their loans.
It said this gives the platform time to adjust its processes if there is a higher risk of defaults. This could include boosting contributions to the provision fund, changing the amount of loans written, or revising its credit criteria.
RateSetter originates consumer, business and property loans. It said that this helps diversify risk as different types of borrowers perform differently through the economic cycle.
The London-based firm added that its portfolio’s weighting towards consumer loans should stand it in good stead during a recession as that sector tends to be less volatile than other asset classes.
For example, it points out that in the last recession in 2009, credit losses on consumer loans doubled for six months but then stabilised.
It said its model means that losses would need to double for 19 months or more before any investor capital would be lost.
RateSetter was created in 2010 and since then has originated more than £2.7bn in loans. It said in September that it expects to break even in the first half of 2019, excluding spending on investor advertising.