Anthony Hilton: Peer-to-peer lenders breathe sighs of relief

It was a good week for peer-to-peer lenders – the people who use the internet to provide an alternative to the banks by putting those with spare cash in touch with those who want a loan.

For months now they have been worried that the Financial Conduct Authority's first stab at regulating them would be so heavy-handed that it would bring their growth grinding to a halt. Though small, they have the potential in time to become a credible alternative to banks for small loans to both people and businesses, but not obviously if a risk-averse regulator strangles them at birth.

So there were sighs of relief all round when proposals published for consultation on Thursday were, on balance, quite sensible.

No doubt there will be some argument over the detail during the discussion period, but in the words of Stuart Law of Assetz Capital, the main recommendations are that these lending platforms keep enough capital to have a reasonable buffer against misfortune, that they have a plan in place so loans continue to be repaid to lenders even if the platform ceases to operate, and that they follow strict rules when holding client money to make sure it is not misused. It is hard to argue with any of that

It is nevertheless the case that the capital requirements will inevitably squeeze out some of the smaller operators or force them to sell out to the bigger boys. These in turn will get stronger and be able to expand faster. On balance, at this stage that is probably what the regulator wants.