• Daniels led bank during 2008 financial crisis and PPI scandal
  • Online lender tapping traditional bankers for key roles

Eric Daniels, the former chief executive officer of Lloyds Banking Group Plc during the 2008 global financial crash, has joined the board of British peer-to-peer lender, Funding Circle Ltd.

The six-year-old lender catering to small businesses is increasingly turning to traditional bankers as it expands into the U.S., Germany, Spain, and the Netherlands. The company, which has arranged $2.5 billion in loans, is also girding for the economic impact of the U.K.’s decision to quit the European Union.

"We are a fintech business, but our objective is to bring in a lot of experience and get the best of both worlds," Funding Circle co-founder and CEO Samir Desai said.

In July, Funding Circle hired Jeremy Bennett, the architect of the U.K.’s toxic-asset insurance program following the crash and a former chief of Nomura Holdings Inc.’s European division, as its chief financial officer. Jerome Le Luel, the onetime chief risk officer at Barclays Plc’s credit-card unit, joined the London-based startup last October to oversee risk management.

Taxpayer Rescue

Daniels, 65, led Lloyds through a government-brokered acquisition of troubled Scottish mortgage lender HBOS Plc in 2008, which saddled it with more than 11 billion pounds ($14.6 billion) in losses. The government stabilized the 251-year-old bank with a 20.3 billion-pound lifeline, and British taxpayers remain its largest stockholder with a 9.1 percent stake.

Britain’s biggest mortgage lender also became embroiled in the scandal involving the improper sale of payment protection insurance, which has cost Lloyds more than 16 billion pounds to provide redress for customers. In 2012, Daniels forfeited 40 percent of his final bonus -- 580,000 pounds -- after the bank clawed back compensation for him and a dozen other current and former senior executives.

Daniels joins the board of Funding Circle as the fledgling peer-to-peer industry worldwide confronts a raft of challenges of its own. In May, a corporate governance scandal at San Francisco-based LendingClub Corp. led to the ouster of CEO Renaud Laplanche and shook confidence in the sector. LendingClub’s shares have lost about half their value this year.

Chinese regulators, meanwhile, are racing to get control of a runaway market where online lending platforms regularly promise investors guaranteed returns. In the U.K., Parliament’s Treasury Committee has asked the Financial Conduct Authority to ensure investors won’t be ripped off by unscrupulous online lenders.

Here to Stay

Daniels said he’s confident the innovation of matching lenders and borrowers on the Internet is here to stay.

"There’s been a sea change in traditional banking," Daniels said in an interview. "New capital and risk-weighting requirements have turned the industry upside down, and it’s become difficult for institutions to continue lending the way they did before. That’s left an opening, and Funding Circle has deftly taken advantage of that."

Since 2011, Daniels has served as a principal and senior adviser to StormHarbour Securities, a London-based investment bank, and as a senior adviser to CVC Capital Partners, a global private-equity firm.

He said he will serve on Funding Circle’s risk and audit committees. Daniels will work closely with another one-time bank chief who’s jumped into online lending: Bob Steel, the former CEO of Wachovia Corp. who sold that bank to Wells Fargo & Co. during the crisis. Steel joined Funding Circle’s board in 2014.

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