registerme
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Post by registerme on Apr 15, 2016 7:25:56 GMT
dualinvestor not surprisingly Adair Turner's comments were picked up, and discussed here. Most of them were taken out of context and reported inaccurately.
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Post by propman on Apr 15, 2016 8:14:28 GMT
While the PF isn't perfect, there is no doubt that it has provided an effective method of spreading bad debts over the lenders. Statistically it takes a surprisingly large loanbook before an investor's return is likely to follow the entire loanbook each year. For larger investors happy to manage a loanbook of loans to 1000+ investors its impact has probably been small (although from people's reactions to a few bad debts at Zopa pre-SG it probably has provided many of these with significant peace of mind). For those who want to relend quickly (ie unwilling to wait to spread over multiple borrowers) and for those picking off the highest rates with sizable loan parts there are also benefits.
For dealing with down turns we are yet to see its performance. It will certainly reduce the losses for the unlucky. Personally this means I am happier to commit a higher portion of my funds. It is often said that money should not be lent through P2P unless you can afford to lose it. Personally I think that is simplistic. Yes there is a tiny fraud risk of losing everything, but there is a risk of many other financial catastrophies as well many of which no planning would avoid. As a result, I think it is appropriate to put some money in the more established platforms that you can't afford to lose if you can afford to have it illiquid for several years and you can afford to lose a proportion corresponding to an unlikely but realistic severe down-turn. I think the PF reduces the loss on this scenario by more than the "lost return" used to fund it again due to spreading the risk and so largely eliminating the impact of an unlucky allocation of loans.
Personally I think this would better (but slightly less completely) be achieved by an alternative resolution scenario where the fund reverts to only paying capital (or perhaps a proportion of it in a severe case) as it was due rather than calling in all loans. The only benefits I can see of the actual mechanisms over this is the greater likelihood that in the event no-one would lose any capital. However I think the loss of liquidity and extreme nature of the event would be likely to finish RS while my solution would allow continuation if at a reduced level until confidence was restored. As a result I think that the current plans for a resolution event massively increase the liquidity risk for shorter term lenders and the likelihood of platform failure (that I think is likely over the longer term). but as only a small lender in shorter markets with no equity stake in RS this is a small issue for me and I am comforted by the existence of the PF.
Yes I would like greater transparency over the rules and lending (not least a way of knowing where I have multiple micro-loans to a single borrower). Far too much is announced after the event for my liking. But I understand that a balance must be struck as all announcements lead to time answering the questions of investors.
- PM
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Post by westonkevRS on Apr 15, 2016 9:38:33 GMT
The changes to the Coverage Ratio methodology has now been finished Most of the changes were made on the 13th April and finalised today (some commercial loans couldn't be assigned their individually calculated expected loss estimates on the 13th April because they didn't have unique markers). As you'll see, the Coverage Ratio has now come out at 137 (which to the delight of Finance, is where they predicted it would finish after our changes).
Again rather than speculate on the maths or the "jiggling of numbers", if anyone would like to visit the office and see the workings and inherent prudence they are welcome anytime.
Kevin.
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Post by dualinvestor on Apr 15, 2016 9:56:49 GMT
dualinvestor not surprisingly Adair Turner's comments were picked up, and discussed here. Most of them were taken out of context and reported inaccurately. Registerme, I have no doubt they were discussed and frankly I have not read the thread; however it would have been difficult for me to take them out of context as I was there when he made them
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Post by dualinvestor on Apr 15, 2016 10:01:55 GMT
Again rather than speculate on the maths or the " jiggling of numbers", if anyone would like to visit the office and see the workings and inherent prudence they are welcome anytime. Kevin. Kevin, no-one, as far as I am aware, is speculating on the maths, the fundamental point raised was that the coverage ratio was not increased by the injection of new money. However unfortunate the wording of the original post may have been.
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registerme
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Post by registerme on Apr 15, 2016 10:57:36 GMT
dualinvestor not surprisingly Adair Turner's comments were picked up, and discussed here. Most of them were taken out of context and reported inaccurately. Registerme, I have no doubt they were discussed and frankly I have not read the thread; however it would have been difficult for me to take them out of context as I was there when he made them Sorry, you're right. There was no problem with the initial reporting of the interview. Subsequent re-reporting did take one important point out of context (ie they dropped his comments specifically about automated credit checking of SMEs).
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alender
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Post by alender on Apr 15, 2016 11:09:11 GMT
While the PF isn't perfect, there is no doubt that it has provided an effective method of spreading bad debts over the lenders. Statistically it takes a surprisingly large loanbook before an investor's return is likely to follow the entire loanbook each year. For larger investors happy to manage a loanbook of loans to 1000+ investors its impact has probably been small (although from people's reactions to a few bad debts at Zopa pre-SG it probably has provided many of these with significant peace of mind). For those who want to relend quickly (ie unwilling to wait to spread over multiple borrowers) and for those picking off the highest rates with sizable loan parts there are also benefits. While the PF gives you a predictable income it does not change the spread of risk as RS have said that if the PF fails any defaults are to be spread amongst all investors. It also does not give you a higher return as there are cost to fund and run the fund which could otherwise have been passed on by a higher rate.
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Post by dualinvestor on Apr 15, 2016 11:59:36 GMT
The changes to the Coverage Ratio methodology has now been finished Most of the changes were made on the 13th April and finalised today (some commercial loans couldn't be assigned their individually calculated expected loss estimates on the 13th April because they didn't have unique markers). As you'll see, the Coverage Ratio has now come out at 137 (which to the delight of Finance, is where they predicted it would finish after our changes). Again rather than speculate on the maths or the " jiggling of numbers", if anyone would like to visit the office and see the workings and inherent prudence they are welcome anytime. Kevin. This is a "speculat(ion) on the maths" On reading the Ratesetter web site "protection" page there is much made in general terms of the methodology of the Protection Fund but little detail. Neither is anything said about the qualifications of the credit committee or any sub committee that comes up with the coverage figure. There is however a claim "Our credit and risk team is fully CIFAS qualified." Dealing with CIFAS first, I can't see any mention of Ratesetter in their list of members www.cifas.org.uk/cifas_members, neither can I see any mention on their site of CIFAS qualifications, they offer a number of short (typically one day) courses. Secondly could you let us know of any actuarial qualifications of the persons who make up the committee that decides the coverage ratio and/or (if appropriate) the name of independent firm and their qualifications who review the calculation
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Post by westonkevRS on Apr 15, 2016 12:14:46 GMT
RateSetter unequivocally are CIFAS members, use all their tools and attend their conferences. We are also full members of SCOR giving us full reciprocity with the credit reference agencies.
There is no regulatory requirement that those who set the expected loss methodology to have any specific actuarial qualifications. In fact Banks when determining the Basel II expected loss credit ratings do this within the Risk function, who again have no requirement for specific qualification.
That said, two members of the Credit Committee are qualified accountants, and another two are (or were) FCA approved persons. We have an external Group Audit firm (Grant Thornton) and the process has been through due diligence with numerous funders included the BBB and Eaglewood.
Kevin.
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Apr 15, 2016 12:15:16 GMT
The changes to the Coverage Ratio methodology has now been finished Most of the changes were made on the 13th April and finalised today (some commercial loans couldn't be assigned their individually calculated expected loss estimates on the 13th April because they didn't have unique markers). As you'll see, the Coverage Ratio has now come out at 137 (which to the delight of Finance, is where they predicted it would finish after our changes). Again rather than speculate on the maths or the " jiggling of numbers", if anyone would like to visit the office and see the workings and inherent prudence they are welcome anytime. Kevin. This is a "speculat(ion) on the maths" On reading the Ratesetter web site "protection" page there is much made in general terms of the methodology of the Protection Fund but little detail. Neither is anything said about the qualifications of the credit committee or any sub committee that comes up with the coverage figure. There is however a claim "Our credit and risk team is fully CIFAS qualified." Dealing with CIFAS first, I can't see any mention of Ratesetter in their list of members www.cifas.org.uk/cifas_members, neither can I see any mention on their site of CIFAS qualifications, they offer a number of short (typically one day) courses. They do appear to be members of CIFAS, Retail Money Market Ltd t-a RateSetter appears under National Fraud Database & Affliate Members on the CIFAS members page
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Post by dualinvestor on Apr 15, 2016 12:25:29 GMT
RateSetter unequivocally are CIFAS members, use all their tools and attend their conferences. We are also full members of SCOR giving us full reciprocity with the credit reference agencies. There is no regulatory requirement that those who set the expected loss methodology to have any specific actuarial qualifications. In fact Banks when determining the Basel II expected loss credit ratings do this within the Risk function, who again have no requirement for specific qualification. That said, two members of the Credit Committee are qualified accountants, and another two are (or were) FCA approved persons. We have an external Group Audit firm (Grant Thornton) and the process has been through due diligence with numerous funders included the BBB and Eaglewood. Kevin. Firstly I never stated that there was a regualtory requirement. I asked for you to state if any member had actuarial qualifications, from your absence to a reply to that I presume the answer is no. The point about CIFAS membership has been cleared up, by someone else,; however how are "Our credit and risk team is fully CIFAS qualified?" When CIFAS does not offer qualifications.
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jimc99
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Post by jimc99 on Apr 15, 2016 12:59:38 GMT
My wording "jigg!ing of the math" was not meant to be offensive. Sorry if it's come across that way.
I guess the bottom line is that the coverage ratio has dropped from 1.7 when I started investing to 1.4 (1.3 before the calculation change yesterday). So yes I am concerned, who would not be?
My question is that as the expected default percentage reduction was due to the belief or evidence that 5 year loans were less likely to default after 1 year of repayments, was the expected default percentage increased for those 5 year loans during the first year?
Previously in this thread RS stated that the expected default level was based on some 8,000,000 contracts or records. I simply wonder how this wealth of information seems to have been given second place to the new math calculation and result in a reduction of the expected defaults. I would expect that with so much historical data not much would change!
I apologise if my posts offend anyone but it's in my interest to try and increase the cover ratio back to a level that gave me confidence when I started investing in RS.
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Post by propman on Apr 15, 2016 13:20:41 GMT
Previously in this thread RS stated that the expected default level was based on some 8,000,000 contracts or records. I simply wonder how this wealth of information seems to have been given second place to the new math calculation and result in a reduction of the expected defaults. I would expect that with so much historical data not much would change! IIRC the previous methodology purely looked at the actual rate at which the loans made 6-18 months previously had defaulted and assumed that this performance would be consistent with similar loans throughout the loanbook. If loans have a higher default rate in the opening period, this would overstate the likely defaults for the older loans and so an adjustment such as that made would be appropriate.
If I am correct on the methodology, RS must have significantly tightened their credit procedures as the cohort concerned appear to have a higher default rate than that now assumed for the portfolio.
- PM
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jimc99
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Post by jimc99 on May 5, 2016 23:44:24 GMT
Well talking about the MR has been fun for the last few days... What's next?
Ahhh the coverage rate just dropped back down to 1.3 Whoopi.
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Post by westonkevRS on May 6, 2016 19:53:00 GMT
Well talking about the MR has been fun for the last few days... What's next? Ahhh the coverage rate just dropped back down to 1.3 Whoopi. We like to keep things interesting. Besides when it went up a few points we had complaints of fudging the numbers, now it's gone down a few points we'll get complaints of potential defaults being to high. All good fun. Just for the record though, we update the variables monthly. So there can be a slight movement each month. I actually expect the coverage rate to drop a little the next 4 months, and then grow through to the end of 2016. But that's an estimate, only time will tell... Kevin.
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