Ratesetter’s Rated Loans Sets Precedent

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Nick Moules
15th July 2014

Recently, Ratesetter became the first platform worldwide to be independently risk-rated.

It has been awarded a rating of 1 by the research agency, FE, which means it is considered low risk and investors can expect a steady return on their cash.

This is a clear sign of maturity in the market. In the past, independent ratings have signified a firm’s intention to securitise loans as the third party score satisfies potential investors. In this instance, Ratesetter has put the move down to a need to further reassure savers over the safety of their investment, and it could put pressure on other firms in the market to acquire similar ratings.

We believe this to be another positive move for the market, but it would be wrong at this stage to seek similar ratings from FE. Primarily because our model is quite different to Ratesetter – our lenders are not really “savers” in the sense that those lending on Ratesetter are. We class our lenders as investors as the risk of lending to businesses without a compensation fund is higher, but so are the rewards.

We’ll try to keep lenders posted on any developments in this field.

Read the full Financial Times article (subscription required)

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