An open letter to the Financial Times, regarding an article published on 16th March 2016

Dear Sir,

In quoting Bibby Financial Services’ David Postings regarding P2P business lending, your correspondent Andrew Bounds displays breathtaking naivety in publishing the jaundiced views of a CEO whose job may be on the line because the business of which he is in charge is buckling under the pressure of healthy competition. It is true that Alternative Finance, including P2P business lending, has not yet had to face an economic down cycle. However, to suggest that the entire sector is facing a “meltdown” is blatant scaremongering that has no basis in fact.

To argue that shareholders would “take the hit” in the case of bank depositors’ money coming under threat is just plain wrong. It was members of the public who “took the hit” in 2008 because it was their money that was used to bail out banks which were technically bust – a situation caused in no small measure by banks borrowing short and lending long, a combination that would be impossible to replicate in P2P because all loans are matched.

To question due diligence and risk assessment processes in P2P is also misleading. The systems are equally as good as those of the banks. Indeed, many of those in charge of P2P lending are ex bank employees. The ultimate test is to look at loans that go bad; this information is readily available in the P2P sector, but not so in the case of the banks where it is a closely-guarded secret. To cite the incidence of the failure of an equity crowdfunding exercise is not the same thing at all and simply demonstrates the desperation to find facts to back the argument. As an aside, if one in five equity investments have failed, it means four out of five (80%) survived.

In the case of my own company, all business loans have to pass the scrutiny of not only our own lending specialists, but also those of leading credit insurers, who provide cover on the underlying asset that we use as security. If we were even tempted to lower our standards we would not be allowed to do so. I know of no bank that can provide that same level of comfort.

I would not criticise the FT for advising caution, but I would expect it to examine the facts and the motives behind the people it quotes so prominently.

Yours faithfully,

Angus Dent

CEO at ArchOver Limited

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