The City watchdog has urged peer-to-peer lenders to improve their internal governance controls to prevent a wave of disorderly wind-downs in the sector.
The Financial Conduct Authority published a letter today that it distributed to the boards of online lending platforms showing it has ordered peer-to-peer lenders to improve contingency plans for being ordered to close.
If platforms do not improve their preparations, they may be bloked from extending new loans, the FCA said.
Andrew Kay, head of department in retail lending supervision at the FCA, said: “Coupled with a lack of liquidity monitoring and capital adequacy planning, we found little evidence of firms’ ability to identify when an invocation of their wind-down plan would realistically ensure an orderly wind down.”
The regulator recommended peer-to-peer lenders take immediate action to avoid complications during winding-down processes.
These suggestions included ring-fencing funds to pay for a wind-down and regular liquidity monitoring.