The government has admitted British Business Investments, a subsidiary of the British Business Bank, is exposed to a higher level of peer-to-peer loan defaults compared with its other investments.
The revelation comes amid pressure from former City minister Lord Myners for the BBB to reveal data on its exposure to P2P loans.
Responding on behalf of the government to a parliamentary query from Lord Myners on whether the BBB is exposed to a higher level of P2P bad debt than its other loans, Lord Callanan said returns are positive overall but admitted there were some defaults.
“The level of default rates observed on the portfolio of loans generated through the P2P 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,” he said.
“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 P2P loan portfolio is above the overall blended level 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 BBB’s objectives and programme criteria.”
He added that the bank has not experienced any negative returns from the P2P platform investments liquidated to date.