| One of the main tasks of the European Banking Authority (EBA) is to monitor new and existing financial activities, adopt guidelines and recommendations. The EBA also promotes the safety and soundness of markets in regulatory practice. Peer to peer lending has been recently identified by the EBA as an innovation in the financial sector and therefore worth studying and understanding. The Banking Authority released at the end of February results of such study in an Opinion Letter addressed to the European Commission, the European Parliament and the European Council. |
The EBA has focused its work on the assessment of risks arising for market participants, their respective drivers and the extent to which these could be addressed in existing EU directives and regulations. According to their analysis, it is desirable that different practices across Europe find a common ground, so “to avoid regulatory arbitrage, create a level-playing field, ensure that market participants can have confidence in this market innovation, and contribute to the single European market”. Creating an ad hoc European Regulation would be a lengthy process therefore the EBA thinks that the common ground for peer-to peer lending should be found within existing EU laws and directives. For instance, in the Opinion Letter it is reported that the EU Payment Service Directive would review the feasibility to cover payments-related aspects of peer-to-peer lending. However, the EBA points out that many other risks would remain unaddressed. Among these, lack of transparency, risk of fraud and risk of platform’s default.
The European Banking Authority concluded that peer-to-peer lending portals fall outside the definition of credit institution and therefore relevant European Directives in the field cannot be applied. However, should the market evolve to the direct participation of credit institutions in providing loans through lending-based crowdfunding (as some indications already suggest), this of course would change.
The Opinion Letter of the EBA comes a few months after similar studies released by the European Securities and Markets Authority (ESMA). Although these are preliminary researches based on a small sample size, they represent an important step for the European Union in the long road to a common approach for crowdfunding.
References:
EBA (2015). Opinion of the European Banking Authority on lending-based crowdfunding
The European Banking Authority concluded that peer-to-peer lending portals fall outside the definition of credit institution and therefore relevant European Directives in the field cannot be applied. However, should the market evolve to the direct participation of credit institutions in providing loans through lending-based crowdfunding (as some indications already suggest), this of course would change.
The Opinion Letter of the EBA comes a few months after similar studies released by the European Securities and Markets Authority (ESMA). Although these are preliminary researches based on a small sample size, they represent an important step for the European Union in the long road to a common approach for crowdfunding.
References:
EBA (2015). Opinion of the European Banking Authority on lending-based crowdfunding
| About the author - Irene Tordera Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives. During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem. |
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