Only last week, Lord Stephenson apologised for his role as chairman of HBOS. He was at the helm of the bank during the run up to the financial crisis. Now he’s finally acknowledged that some of the bank’s lending was “incompetent”.
The HBOS risk team did do an especially poor job of matching up attitudes to risk – but any company that suddenly needs an emergency take-over to stay afloat hasn’t been run well.
Peer-to-peer lenders handle risk far better. Just as brokers have always worked to match up the best deal, this new approach to finance takes a more personal view, matching the risk appetite of investors to specific loans.
The new wave is putting the old banks and building societies to shame. None of the old guard has delivered any real growth for half a decade. Peer-to-peer lenders like West One Loans are rapidly filling that gap.
There’s a fundamental reason for the edge of many alternative models. When less cash is squirreled away by the middle men, both investors and borrowers can win. Investors get higher returns than many alternative investment opportunities, and they can control their own attitude to risk.
Vitally, borrowers get some breathing space from the mechanical restrictions put in place by high street lenders.
The success of peer-to-peer is down to this fundamentally different attitude. It’s why another peer, Lord Rothschild, has just bought a stake in the peer-to-peer lender Zopa – a high profile signal in the rise of alternative finance.