First European Marketplace Loan ABS Deal Expected This Year

The market for peer-to-peer lending, commonly referred to as marketplace lending, has reached the point in the U.K. that market participants expect the first European securitization of marketplace ABS to originate from the U.K. this year, according to a recent Bloomberg article. “[T]he region’s first sale of bonds tied to loans made via these online services could be just months away,” according to sources in the article at Moody’s and BBVA. The article describes market participants’ interest in these deals, quoting Aaron Baker, a BBVA Credit Analyst, indicating that “[a] multitude of funds are being built in order to invest in these products and banks are looking at how to provide finance to the sector.” In describing the role that securitization will have for funding growth in the sector, the articles states that “[s]ecuritization will be driven by hedge funds and other institutional investors looking to sell loans made via peer-to-peer services, rather than platform operators.”

The article also touches on the U.K. regulatory landscape for marketplace lending, highlighting that “the industry has moved to ease investor concerns with major U.K. operators regularly publishing loan-book data and default rates on their websites” and adding that as of 2014, the market has been regulated by the Financial Conduct Authority. On the evolution of banks’ involvement in the industry, Sachin Patel of Funding Circle stated that “[a]s the industry has evolved, so has its relationship with the banks […] Now we work together. Securitization is just the latest example of this.”

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