ceejay
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Post by ceejay on Jan 9, 2019 0:01:21 GMT
Hmmmm is money in the holding account any safer than on loan? It is presumably in a ring fenced account whilst in holding, but of course still no fscs. ...
Yes. Although how much safer is an interesting question.
If RS fails completely then all your funds, whether in holding or in loans, are at risk. If it's a relatively soft crash, then you might hope that the holding funds have been held separately and that you'll get them back, but there is of course no cast-iron guarantee of that.
However there is another scenario where RS continues to trade, but where there is a great shortage of investors so that releasing loans will be next to impossible. In this scenario, you should be able to get your money out of the holding account. Of course, this state of affairs might not last long before a full-blown failure, so you'd expect there to be a substantial "run" on holding accounts, and you might need to be quick.
So, overall, there is significantly more risk attached to money on loan than in holding. Of course, money in holding isn't earning anything, which isn't good...
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Post by gravitykillz on Jan 9, 2019 1:02:44 GMT
True while ratesetter exists funds are protected by the pf. However if something were to happen to rs that limited protection would also disappear. However there is also the possibility of another p2p lender taking over the business as well.
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Stonk
Stonking
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Post by Stonk on Jan 9, 2019 9:22:17 GMT
While RS exists, the Provision Fund both protects and limits returns, and the model decouples investor return from what the borrower is paying.
If RS were to fail, presumably with the PF abandoned, investors would be left holding loans directly to borrowers which we would have to hold until completion. Although we would no longer have the protection of the PF, would we start to receive the full actual interest rate that the borrower is paying? Of course, we would also suffer the defaults, lates, and so on.
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Post by gravitykillz on Jan 9, 2019 13:39:24 GMT
While RS exists, the Provision Fund both protects and limits returns, and the model decouples investor return from what the borrower is paying.
If RS were to fail, presumably with the PF abandoned, investors would be left holding loans directly to borrowers which we would have to hold until completion. Although we would no longer have the protection of the PF, would we start to receive the full actual interest rate that the borrower is paying? Of course, we would also suffer the defaults, lates, and so on.
If people want that then they are investing in the wrong p2p lender. Funding circle can give higher rates but also the defaults that go with it. I for one prefer ratesetter and the protection of the pf even though i get lower rates.
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Post by gravitykillz on Jan 9, 2019 13:43:26 GMT
It would be a sad day if a major p2p lender went bust. As the effect would be the vast majority of people would pull out their money creating a domino effect for every uk p2p lender.
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rscal
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Post by rscal on Jan 9, 2019 13:58:28 GMT
It would be a sad day if a major p2p lender went bust. As the effect would be the vast majority of people would pull out their money creating a domino effect for every uk p2p lender. Calling alll... Great British Consumers.... the baton is with you now.... don't let us down!
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mjc
Member of DD Central
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Post by mjc on Jan 9, 2019 14:38:55 GMT
This is something it would be wise to consider, if a MINOR p2p goes pop, wouldn’t it be far better to have a contingency plan hatching now to consider stepping in to buy the platform (not the loans they stay with the lenders). It can’t be worth much if it’s failed, save a very expensive Col style Receivership, retain the good staff, and run for member/investors. It nothing like Col they were sans licence. This is not a discussion for this platform, but as the topic has been raised.....
We know the first priority is to safeguard the data, protect the bank accounts, keep good staff on board, advise members what is happening, approach the FCA, etc. I’m guessing there are many intellectual ideas on what to do and not do, on Col, Lendy, FS forums!
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robski
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Post by robski on Jan 9, 2019 15:55:50 GMT
If people want that then they are investing in the wrong p2p lender. Funding circle can give higher rates but also the defaults that go with it. I for one prefer ratesetter and the protection of the pf even though i get lower rates. dont think the lenders would stand to benefit from anything personally. My expectation is that the difference between borrower rate and lender rate (lets call it the admin fee rate) would be what the firm stepping in would receive for running down the book. Its should be a reasonable amount as it would just be maintenance, and probably some passing to collections, so no marketing etc
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Stonk
Stonking
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Post by Stonk on Jan 9, 2019 17:06:27 GMT
If people want that then they are investing in the wrong p2p lender. Funding circle can give higher rates but also the defaults that go with it. I for one prefer ratesetter and the protection of the pf even though i get lower rates. Don't get me wrong, I don't want that to happen to RS. I'm just pondering how a disaster scenario might pan out. I, too, prefer RS over FC for precisely the same reasons. Every day I log onto FC in semi-dread of what has defaulted today, or gone processing or late, or been downgraded, or what half-baked excuse some borrower has cooked up to avoid payment. Every day I log onto RS in the safe knowledge that my various balances will be exactly what my spreadsheet says they should be.
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Post by oppsididitagain on Jan 9, 2019 21:38:40 GMT
something strange going on in the rolling market tonight. There was about 100K of borrowers queueing in a mkt of 3.5/3.6 At 1800 I offered money at 3.8 and there was about 400K infront of me. Im now filled and there are still 60K of borrowers waiting. So Big demand for cash tonight, maybe someone unwinding and RS re matching as my 1K order was split into about 13 loans between £50-200 with term dates between 7M and 38M Maybe im reading too much into it, this isn't normal activity..
3.9% getting filled as I type
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Post by gravitykillz on Jan 9, 2019 22:18:55 GMT
something strange going on in the rolling market tonight. There was about 100K of borrowers queueing in a mkt of 3.5/3.6 At 1800 I offered money at 3.8 and there was about 400K infront of me. Im now filled and there are still 60K of borrowers waiting. So Big demand for cash tonight, maybe someone unwinding and RS re matching as my 1K order was split into about 13 loans between £50-200 with term dates between 7M and 38M Maybe im reading too much into it, this isn't normal activity.. 3.9% getting filled as I type Yes looks like someone is liquidating a massive portfolio prior to the brexit vote. I have put 2k in at 4%. Hoping to get it filled at some point.
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alender
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Post by alender on Jan 10, 2019 9:37:28 GMT
It would be a sad day if a major p2p lender went bust. As the effect would be the vast majority of people would pull out their money creating a domino effect for every uk p2p lender.
This is very real danger for RS as it uses the Northern Rock model for funding i.e. use cheap short term money to fund long term loans. A run of funds would produce a lock in which would in turn reduce new investments to near zero. The business is now in trouble as it is not making money with and with no prospect of making money for a considerable time (if at all); in this scenario I cannot see the owners injecting more money into RS (good money after bad). In the old rules RS would fold, monies pool and lenders repaid from loans when the money was available less admin costs (which no doubt will be high as can been seen by any company in receivership). In the new rules (as far as I am aware) RS will now reduce the interest and/or capital of all lenders, the reason this will be done is to keep the directors salary flowing and in the vain hope that somehow RS get out of this situation. This will end with RS folding as described above but with less money for lenders.
This could also be cause by a number of other financial events either real or perceived.
This is one of the reasons I longer invest with RS
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robski
Member of DD Central
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Post by robski on Jan 10, 2019 10:38:53 GMT
It would be a sad day if a major p2p lender went bust. As the effect would be the vast majority of people would pull out their money creating a domino effect for every uk p2p lender.
This is very real danger for RS as it uses the Northern Rock model for funding i.e. use cheap short term money to fund long term loans. A run of funds would produce a lock in which would in turn reduce new investments to near zero. The business is now in trouble as it is not making money with and with no prospect of making money for a considerable time (if at all); in this scenario I cannot see the owners injecting more money into RS (good money after bad). In the old rules RS would fold, monies pool and lenders repaid from loans when the money was available less admin costs (which no doubt will be high as can been seen by any company in receivership). In the new rules (as far as I am aware) RS will now reduce the interest and/or capital of all lenders, the reason this will be done is to keep the directors salary flowing and in the vain hope that somehow RS get out of this situation. This will end with RS folding as described above but with less money for lenders.
This could also be cause by a number of other financial events either real or perceived.
This is one of the reasons I longer invest with RS
This is incorrect I am afraid. They used to do this, ie you could get your money back from Rolling and they potentially may not have had enough to repay it. It no longer functions like that. Arguably it didnt even work like short term vs long term before, because of the drag on withdraw you couldnt physiclaly get your money out before they would have been aware of a shortfall and hence not allowed the withdraw, and the T&Cs clearly said that you may not have been able to withdraw.
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alender
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Post by alender on Jan 10, 2019 11:01:52 GMT
This is incorrect I am afraid. They used to do this, ie you could get your money back from Rolling and they potentially may not have had enough to repay it. It no longer functions like that. Arguably it didnt even work like short term vs long term before, because of the drag on withdraw you couldnt physiclaly get your money out before they would have been aware of a shortfall and hence not allowed the withdraw, and the T&Cs clearly said that you may not have been able to withdraw. I agree the changes to Rolling make it easier for RS to justify not paying back funds to investors as can be seen by delays in investors getting to their Rolling funds. However I cannot see what has materially changed in the event RS cannot repay monies to investors.
Under the old or the new rules investors would be locked in and unable to get their money except now RS directors will be able to take their salaries for a time (determined by themselves) using up investors capital and interest until they decide the company is no longer viable.
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dandy
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Post by dandy on Jan 10, 2019 11:09:52 GMT
This is incorrect I am afraid. They used to do this, ie you could get your money back from Rolling and they potentially may not have had enough to repay it. It no longer functions like that. Arguably it didnt even work like short term vs long term before, because of the drag on withdraw you couldnt physiclaly get your money out before they would have been aware of a shortfall and hence not allowed the withdraw, and the T&Cs clearly said that you may not have been able to withdraw. I agree the changes to Rolling make it easier for RS to justify not paying back funds to investors as can be seen by delays in investors getting to their Rolling funds. However I cannot see what has materially changed in the event RS cannot repay monies to investors.
Under the old or the new rules investors would be locked in and unable to get their money except now RS directors will be able to take their salaries for a time (determined by themselves) using up investors capital and interest until they decide the company is no longer viable. Under old RS as soon as PF was underfunded there would be a Resolution Event and essentially end of RS. This was a good way of keeping management's feet to the fire. It was not commercially sensible however. New RS is more commercially sensible. In such event (underfunded PF) who does it actually help to put the business into wind down, prohibit sales/new loans/new money etc etc? It makes far more sense to reduce interest payable and let the market find its new levels for new money (or not).
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