Metro Bank has confirmed that it is in talks to acquire peer-to-peer (P2P) lender RateSetter.

Responding to speculation over the weekend, the challenger bank stated that it has entered in to a period of exclusivity with RateSetter parent company Retail Money Market, "but discussions regarding the potential acquisition are at an early stage".

The statement continued that RateSetter's distribution platform could accelerate the bank's stated strategy to grow its unsecured consumer lending book.

"There can be no certainty at this stage that a formal agreement will be reached, nor as to the terms of any agreement," it added.

The move follows RateSetter halving the interest rate paid to investors in anticipation of a wave of business defaults due to the Coronavirus crisis and looming recession.

RateSetter stated that six per cent of borrowers have requested a payment freeze and, as a result, it increased projected loan losses from £27.5 million to £39.2 million last month.

It is not the only P2P lender taking defensive action, with Lending Works cutting all rates to zero and banning withdrawals for a 90-day period ending in July, while Funding Circle has stopped all cash withdrawals by investors.

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