OREANDA-NEWS. The National Bank of Ukraine suggests that the banking community, professional associations, the Verkhovna Rada of Ukraine Committee on Financial Policy and Banking and relative agencies should discuss and adopt a unified approach to handling peer-to-peer lending.  A proper regulatory framework should be put in place to regulate debt financing that enables borrowing money for the benefit of third parties through the use of fiduciary and consulting services and peer-to-peer lending platforms that bring both potential borrowers and lenders together with no intermediary.

The global online peer-to-peer lending market is growing rapidly and different business financing options are gaining momentum.  Presently, the global peer-to-peer lending market is estimated at USD 64 billion.  According to Morgan Stanley estimates, the global peer-to-peer lending industry is expected to top USD 300 billion by 2020,” said NBU Deputy Governor Ms Kateryna Rozhkova. “However, peer-to-peer investments in loans are more risky than bank loans as there is no  guarantee that the money will be repaid and  any funds lent through the websites are not covered by the Government-backed Financial Services Compensation Scheme. Furthermore, peer-to-peer lending schemes take a more risky approach to selecting borrowers (borrowers unable to qualify for loans from banks turn to these schemes).

Some Ukrainian banks have also begun to offer peer-to-peer lending options. These banks offer a higher interest rate on deposits (on average, an interest rate on deposits is 5 percentage points above prevailing market rates).  Higher interest rates enabled these banks to lure more depositors and attract more deposits. As of 1 April 2016, Ukraine’s peer-to-peer lending is estimated at UAH 1.5 billion. In March 2016, banks reported an increase of UAH 0.6 billion in peer-to-peer loans. 

At the same time, peer-to-peer lending is not covered by the Law of Ukraine On Banks and Banking and is regulated neither by the NBU nor other financial markets regulators.

Without a proper regulatory framework in place, banks  are exposed to high risks due to the following factors:

the lack of responsibility assumed by financial intermediaries;

deposits are not insured by the Deposit Guarantee Fund;

funds are invested in borrowers' loans; the credit risk on  these investments is determined in accordance with the methodology specified by banks' policies and is not covered in NBU regulations; 

low levels of awareness among the public about risks associated with peer-to-peer lending; 

peer-to-peer lending offers banks an opportunity to carry out indirect related-party transactions;

peer-to-peer lending transactions go unrecorded in the bank's accounting records.

“The NBU welcomes the emergence of new cutting-edge instruments. However, these instruments should be transparent, risk-weighted and covered by rules and regulations. For this reason, we urge the expert community to take a unified approach to handling peer-to-peer lending, which should not hinder the development of the banking industry while protecting banks' clients,” underlined Ms Rozhkova.