Capital Markets Authority tightens oversight: New reporting obligation for remaining P2P companies
The Capital Markets Authority has introduced new requirements for P2P companies, mandating automated reporting. The regulation aims to protect lenders and increase transparency in the sector.
The Capital Markets Authority published today (Sunday) a new circular tightening oversight of P2P (peer-to-peer lending) companies, or at least those remaining in the market. Under the new regulation, which will take effect in six months, companies operating systems for mediating loans between lenders and borrowers will be required to submit automated reports to the Authority on a semi-annual and annual basis.
The reports will include four key pillars: full financial data based on audited reports, the flow of funds and waiting times for withdrawals, a breakdown of the investment and credit portfolio (including specific reference to housing loans), and detailed data on overdue debts and a segmentation of uncollected debts.
The expanded oversight instructions come at a time when the credit mediation sector in Israel is undergoing severe turmoil and a depletion of players. The rise in interest rates in the economy has eroded the attractiveness of the platforms compared to bank deposits and money market funds, leading to the exit of leading players from the field: the company Blender decided to close its P2P activity (which included a portfolio of 409 million shekels) and put it into run-off, while the company Tarya, which at its peak managed a portfolio of 3.4 billion shekels, faced a heavy wave of redemptions, stopped issuing new loans, and was forced to sell its mortgage portfolio for 400 million shekels to the Luzon Group in order to meet withdrawal requests of hundreds of millions of shekels – and today it focuses mainly on managing and returning the existing portfolio.
Even before that, the credit mediation company eLoan was acquired by Meitav and its activity was terminated in 2022 with a decision to write off tens of percent of the debt for some of the creditors who were in arrears. Today, the consumer and business market in this field relies mainly on a few players such as BTB, which focuses on credit for small and medium-sized businesses, and on smaller volumes in Spark by Ogen.
The Capital Markets Authority explains in the explanatory notes to the circular that credit mediation licensees "manage client funds and do not bear the credit risk themselves," and therefore oversight is required to protect not only the borrowing public but also, explicitly, the lending public who provide the funds on the platforms. A special emphasis in the circular was placed on the transparency of portfolio performance, as companies will be required to disclose data on net yields, collected commissions, and the "average period of time (in days) that elapses from the day of the withdrawal request... to the day of the actual withdrawal" – the issue that has become the main pain point for investors in recent years.
Beyond tightening direct control, the Authority notes that the data collected will be used to create a "common language" between the various financial regulators, in accordance with the recommendations of the Strum Committee, for the purpose of a comprehensive analysis of credit volumes and their price in the economy.
"The oversight measures we are publishing now are intended to deepen ongoing control and ensure orderly and adapted risk management," said Capital Markets Commissioner Amit Gal. "The role of the Authority is to ensure protection not only for the borrowing public, but also for the lending public while maintaining competition in the credit and investment sector. Combining continuous and automated reporting with internal control mechanisms will ensure proper management and protect the interests of the public of clients in the long term."
