Do Lending platforms pose systemic risk? #LenditEurope insights


#1

Lord Adair Turner, from the Institute for New Economic Thinking spoke on this topic. Watch his speech here.

His conclusion was that we all need to keep the products (the new asset class and its derivatives) and their distribution Simple & Transparent.

I agree 100%. However, this only protects from a repeat of the 2008 type of crisis. I asked Lord Turner (watch last 2-3min) about this. Enjoy the dialogue. What risks do you see creeping up?


#2

I think I would agree with Lord Turner that the underlying risk factors are generally the same. What changes in different iterations of finance is the delivery scheme: the design of the contracts, the legal structure of the intermediary, any other agents involved (and their incentives), the amount of due diligence etc. which then makes the particulars of how things “fall apart” in a downturn look different.

Fintech can make things more or less stable and sustainable, depending on how it handles these age-old challenges. Even cyber-risk is not new in essence: The risk to the infrastructure of account and the information contained therein. Florentine bankers circa 1400 also probably worried that their books might be stolen, burned by accident or on purpose.


#3

Lord Turner said that MPLs may prove to be the spare tire in the next crisis.
He claimed that peer-to-peer lending platforms could actually help reduce the risk of a future financial crisis.
I challenged him on this point - reducing risk of a future financial crisis - because he is assuming that the next financial crisis will come in similar shape or form as the subprime crisis. You can watch my question to him in the last 3min of the presentation. It was a great exchange.
What do you think about the Future financial crisis in the credit markets?


#4

The post on Daily Fintech looks at a “Run on the Bank” as The significant type of systemic risk and asks whether Lending platforms have inherently that type of risk.

Is it in agreement with Lord Turner’s recent positioning that Lending platforms can act as the spare tire in the next credit crunch?
@BernardLunn @OrcaJord @Ksimback @kalpouzanis.v