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British Business Bank

Question for Department for Business, Energy and Industrial Strategy

UIN HL1776, tabled on 24 February 2020

To ask Her Majesty's Government whether default rates, and losses in event of default, experienced by the British Business Bank on loans sourced through peer-to-peer lending platforms have been (1) greater or lesser than for the British Business Bank’s overall lending book, and (2) greater or lesser than the British Business Bank’s expectation when extending loans through such platforms.

Answered on

9 March 2020

The British Business Bank’s participation in peer-to-peer lending platforms has been primarily through the Bank’s commercial subsidiary British Business Investments. Data collected across the Bank’s programmes and delivery partners is consolidated on a programme-by-programme basis. The Bank does not record an overall rate of default given the wide range of delivery partners and products across the Bank’s programmes that are not directly comparable.

British Business Investments monitors existing delivery partners and their performance against contractual requirements, which includes monitoring the level of defaults, provisions, impairments[1] and write-offs observed through the life of each investment.

The level of default rates observed on the portfolio of loans generated through the peer-to-peer lending platforms have varied over the life of the investments to date, at times being below and at times being above the initial expected rate at the time of investment. Provisions are raised for defaulted loans but the actual level of losses associated with these defaults will be dependent on the level of recoveries achieved through the life of the investments as not all defaults will result in crystallised losses.

The level of losses provided for as a percentage of the net amount invested across the peer-to-peer platforms loan portfolio, is above the overall blended level[2] for the British Business Investments’ portfolio. This is as expected given the different risk profile and structure of the investments across the portfolio, all of which have been assessed within the Bank’s objectives and programme criteria.

Overall returns from investments through the peer-to-peer platforms have been positive and the Bank has not experienced any negative returns from the peer-to-peer platform investments liquidated to date.

[1] An impairment is an adjustment applied by a fund manager where a performance issue has been identified within a specific investment and are therefore included in the Net Asset Value submitted to the Bank.

[2] This includes the level of defaults, provisions, impairments and write-offs provided by peer-to-peer and non-peer-to-peer delivery partners.