Peer-to-peer lenders based in the UK may be approaching the point where they require further regulation because of growth, the chairman of the Financial Conduct Authority (FCA) has declared.

FCA Chair John Griffiths-Jones was speaking to the Treasury Select Committee. He explained that peer-to-peer lender and crowdfunder platforms have continued to grow apace in the UK, adding that he believes the point may be approaching where some are large enough to offer packages rather than simply lending to individuals.

He told MPs:

“At that point, they become awfully like a bank, and I think it’s very important for the regulator not to allow regulatory arbitrage in the system. What I can assure you is that we’re not asleep at this wheel. What I can’t assure you is when is the right moment to intervene – but it is being kept under constant review.”

Traditionally, peer-to-peer lender platforms have arranged transactions between a single borrower (an individual or SME owner) and a single lender; however, the FCA is forecasting that as they grow in size and popularity, more of them will move toward a portfolio type of investment in which lenders pool their risk by lending to more than one borrower.

According to the FCA’s acting chief executive, Tracy McDermott, around one per cent of p2p borrowers default on their loans at present. But the figure is expected to climb as loans begin to spread “from prime to sub-prime borrowers.”

P2p lender Unbolted, however, has minimised risk to lenders and borrowers alike by offering secured asset loans. Borrowers entrust a valuable they own with the platform, which then acts as security for the loan. This reduces risk on both sides of the transaction.