New P2P rules “credit positive” for securitisations

THE NEW peer-to-peer lending regulations are “credit positive” for securitisations in the sector, according to ratings agency Moody’s.

Beefed-up requirements for platforms’ credit risk assessment and governance standards, wind-down plans and disclosure will strengthen the operational environment, Moody’s said.

“The new rules will strengthen P2P platforms’ operational environment, establish a playbook for winding down lending platforms, and introduce enhanced disclosure regimes,” said James Morton, vice president – senior analyst at Moody’s.

“This is credit positive for existing and future UK securitisations backed by consumer and small- and medium-sized enterprise (SME) marketplace loans for three main reasons:

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“First, the rules impose a requirement for continual credit risk assessments of borrowers, improving the ability to detect deteriorations in borrower creditworthiness.

“Second, they reduce the uncertainty around how marketplace loans will continue to be serviced after the failure of an originator. Third, they introduce common standards across the sector, increasing the ability for investors and regulators to monitor risks.”

SME lender Funding Circle and consumer lender Zopa have both securitised their loans a number of times. Last week, it emerged that Zopa had embarked on its third securitisation – a £245m deal arranged by Deutsche Bank.

“The industry depends on lenders investing their money, and stronger confidence in these platforms will help grow the retail and institutional investor base,” said the Moody’s report. “Additionally, regulatory oversight benefits these lending platforms when we evaluate their securitisations’ portfolio and counterparty risks.”