The Financial Conduct Authority (FCA) introduced new regulations for peer-to-peer (P2P) lending platforms like Landbay in 2014. The regulations require platforms to hold a minimum level of operating capital, have a contingency run-off plan with a third party, and optionally establish a protection fund. The regulations are aimed at reducing risks for lenders by ring-fencing client funds, requiring transparency in reporting, and mandating disclosure of investment risks. While the regulations establish standards, P2P lending remains inherently risky as capital is not covered by the Financial Services Compensation Scheme and losses are possible.

1. THE NEW ALTERNATIVE TO
BANK SAVINGS

2. FCA REGULATION EXPLAINED

3. HOW WILL THIS AFFECT
LANDBAY LENDERS ?
• In April 2014, the Financial Conduct Authority (FCA) introduced new
regulations for peer-to-peer (P2P) lending platforms like Landbay
• These regulations affect both platforms and lenders, so we felt it was
our duty to explain them to you
• We have chosen to highlight the key features of the new regulations to
help lenders to understand and manage their risk

4. WHAT HAPPENS IF A P2P
PLATFORM FAILS?
• Like any lend-to-save system, platforms like Landbay always carry a certain risk because
they depend on individual borrowers paying back their loans
• FCA regulations recognise the risks attached to P2P lending, and therefore cover 3
principal ways in which platforms can reduce risk for lenders
• These risks are covered on the following 3 slides

5. 1. MINIMUM OPERATING CAPITAL
(MOC)
• The FCA requires that all platforms hold a Minimum Operating Capital based on
the outstanding loans
• This ensures a minimum level of funding to help withstand unforeseen financial
shocks

6. 2. RUN-OFF PLAN
• P2P platforms are also required to have a contingency, “run-off” plan involving a
3rd party
• In Landbay’s case, this 3rd party officially hold the deeds to properties we lend
mortgages on, and therefore would repossess the properties in the case of a
client’s default combined with failure of the Landbay platform
• This is what we call a secured loan

7. 3. PROTECTION OR
PROVISION FUND
• The FCA maintain that this is optional
• Our Protection Fund ensures continuity of short term lender interest payments in
the case of any late payments from borrowers
• Cover from a Protection fund cannot be guaranteed. It is not an insurance product
• Risk can never be fully eliminated in any savings or investment product, but to get
as close as possible to ensuring lender returns, our unique business model of
secured loans on the residential rental market provides strong bricks-and-mortar
security

8. CLIENT MONEY
• All platforms must ring-fence client funds, so that they are not held
alongside the funds of the platform or used for the day-to-day operations of
the business
• In the case of a failed platform, only loans that have not yet been drawn
down will be reallocated to lenders
• This is a key difference between P2P lending platforms and banks

9. TAXATION
• P2P platforms are required to inform lenders of their tax obligations
• Currently, all income received by lenders is subject to UK tax, depending on
their individual circumstances
• We would also recommend that lenders seek professional advice if they are
in any doubt
• Changes announced recently by the Government will make P2P lenders
eligible for ISAs and SIPPs in due course

10. REPORTING
• The 2008 financial crisis taught us that firms need to be more open about their
accounts
• P2P platforms must send regular reports to the FCA, detailing:
- our financial and prudential position
- the client money we hold
- any complaints we have received and the details of loans
• We conduct rigorous checks for all users on our system, including Anti Money
Laundering checks, but fundamentally Landbay is a platform open to all

11. DISCLOSURE
• Alongside reports to the FCA, P2P platforms must conform to regulations
regarding disclosure
• We must explain the risks of any P2P platform, allowing lenders to fully
understand that their capital is at risk
• We are committed to highlighting the potential risks of P2P lending and we are
pleased that the FCA is encouraging transparency within the sector

12. FSCS: FINANCIAL SERVICES
COMPENSATION SCHEME
• Firstly, lending on any peer to peer site is not covered by the FSCS
• The FCA believes that sufficient standards are in place to inform lenders of the risks
involved in P2P lending
• Therefore responsibility falls on both platforms (to inform their users), and users
themselves to decide whether or not P2P lending is suitable for them

13. WHY IS LANDBAY SO KEEN TO
HIGHLIGHT RISK?
• FCA regulation is an important milestone for the industry and we welcome it
• We think that the regulation could even be extended in order to further protect
lenders
• We support innovative finance, but our users’ security and risk awareness is of prime
importance to us
• Responsibility and transparency are crucial to the future growth of the P2P sector. We
are responsible for distributing our users’ funds and therefore it is only fair to be
honest with lenders about the P2P industry
• This is all part of the democratisation of the lending market that comes with P2P
platforms

14. THANK YOU
See the full version of this presentation content on our blog at:
http://blog.landbay.co.uk/blog/2014/7/2/fca
Not familiar with some of the terms we’ve used? Check out our
Landbay glossary page on our blog

15. DISCLAIMER
Landbay operates a dynamic peer-to-peer (P2P) lending platform specialising in property loans
secured by first ranking mortgages. While loan investments are secured against property, capital is
still at risk and therefore Landbay lenders face the possibility of losing money. Investments in
mortgages are long-term in nature and may not be readily realisable.
Landbay is regulated by the FCA, however, lenders on Landbay and other P2P platforms are not
covered by Financial Services Compensation scheme.
We recommend that you seek independent financial advice if you are in any doubt as to whether
lending on Landbay is suitable for you.

16. @LandbayUK
info@landbay.co.uk