alender
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Post by alender on Jan 10, 2019 11:40:31 GMT
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). I can understand why this is good for RS but bad for RS investors, once there is a lock in I believe RS is finished as very little new money will be invested and as RS is not making a profit sooner or later it will run out of funds to run the business. As far as I understand it is not just interest that RS will take from investors to fund the PF but capital as well.
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Post by oppsididitagain on Jan 10, 2019 12:03:40 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
Hi Alender
You seem very negative towards RS, Im curious why ? Is it their business model, P2P in general or you just don't think their numbers add up anymore
I met with them in Sept and they told me, that contrary to belief , the way the new rolling and all markets works are : The borrower and lender are matched for the life of the loan, RS just take a spread between lender and borrower, rather than the old model where you were not matched to any given borrower. Historically the rolling market was just one big pool of money which was funded daily.
I don't understand when you say they will take lenders interest to fund the PF, surely if we are matched for the life of the loan the interest is constant. I agree If a lender pulls their funds, RS would have to cover the mismatch in new funding rates. Yes you could have 'a run' if lots of people pulled their funds at once and this could eat into RS profits etc. but I don't see how this would eat into our interest or capital as we are matched and we choose the lending rates. I am curious to see how the new rolling/1 Yr merger will work, maybe they think this will generate for profits for them ? if 1yr averages 4.5/5.2 and rolling from 2.5-3.5. then obviously it would make sense to fund the 1yr via the rolling - Infact it would make sense to fund the whole book through rolling, but like you say that could have the northern rock scenario brought upon them.
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dandy
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Post by dandy on Jan 10, 2019 12:05:28 GMT
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). I can understand why this is good for RS but bad for RS investors, once there is a lock in I believe RS is finished as very little new money will be invested and as RS is not making a profit sooner or later it will run out of funds to run the business. As far as I understand it is not just interest that RS will take from investors to fund the PF but capital as well.
Well if you check their latest filings beta.companieshouse.gov.uk/company/07075792/filing-history they seem to have raised a hefty chunk of money about a month ago. £14m or so! True about taking capital but that is only if interest were to fall to 0 first - by which point I agree it would be the end. However, if we are talking about a small cut to interest of 0.1%-1% then they could probably recover from that with a short term spike in rates to attract new capital. Essentially it gives them (limited) time to turn it around which i think is in everyone's interests. Better than BDO walking in the next day and providing an update 6 months later
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robski
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Post by robski on Jan 10, 2019 12:12:45 GMT
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
Hi Alender
You seem very negative towards RS, Im curious why ? Is it their business model, P2P in general or you just don't think their numbers add up anymore
I met with them in Sept and they told me, that contrary to belief , the way the new rolling and all markets works are : The borrower and lender are matched for the life of the loan, RS just take a spread between lender and borrower, rather than the old model where you were not matched to any given borrower. Historically the rolling market was just one big pool of money which was funded daily.
I don't understand when you say they will take lenders interest to fund the PF, surely if we are matched for the life of the loan the interest is constant. I agree If a lender pulls their funds, RS would have to cover the mismatch in new funding rates. Yes you could have 'a run' if lots of people pulled their funds at once and this could eat into RS profits etc. but I don't see how this would eat into our interest or capital as we are matched and we choose the lending rates. I am curious to see how the new rolling/1 Yr merger will work, maybe they think this will generate for profits for them ? if 1yr averages 4.5/5.2 and rolling from 2.5-3.5. then obviously it would make sense to fund the 1yr via the rolling - Infact it would make sense to fund the whole book through rolling, but like you say that could have the northern rock scenario brought upon them.
You do have capital at risk, its why they calculate 2 versions of coverage, PF and interest So to start the PF will cover all losses until it would clearly be under funded, this is the PF coverage ratio. If things turned bad and the PF wouldnt cover expected losses then you will see a reduction in interest, I assume they would do something like only pay 80% of the interest due or something. Only if that also went completely would they target capital. I guess at that point they really would be in meltdown, ie they would not have any new money coming in, so would be unable to lend. I think once they started reducing interest then 2 things would happen, 1 people would look to put up rates short term and 2 people would start withdrawing. So I think reducing interest would quickly lead to complete failure, but at least it would be managed more obviously.
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robski
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Post by robski on Jan 10, 2019 12:19:36 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. The key difference is a technical one. Old rolling your money was only matched for a month and you could select to not relend it. Hence a very real risk there would be loans that needed funding (as already lent), but no one willing to lend today. The new rolling is matched for the loan term, and if you want to get out early you need to have someone willing to buy it off you. Subtle diff but makes a lot of diff if there is ever a cash shortage. So now its functioning like any investment (no guaranteed way to get out)
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alender
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Post by alender on Jan 10, 2019 13:37:18 GMT
Hi Alender
You seem very negative towards RS, Im curious why ? Is it their business model, P2P in general or you just don't think their numbers add up anymore
I met with them in Sept and they told me, that contrary to belief , the way the new rolling and all markets works are : The borrower and lender are matched for the life of the loan, RS just take a spread between lender and borrower, rather than the old model where you were not matched to any given borrower. Historically the rolling market was just one big pool of money which was funded daily.
I don't understand when you say they will take lenders interest to fund the PF, surely if we are matched for the life of the loan the interest is constant. I agree If a lender pulls their funds, RS would have to cover the mismatch in new funding rates. Yes you could have 'a run' if lots of people pulled their funds at once and this could eat into RS profits etc. but I don't see how this would eat into our interest or capital as we are matched and we choose the lending rates. I am curious to see how the new rolling/1 Yr merger will work, maybe they think this will generate for profits for them ? if 1yr averages 4.5/5.2 and rolling from 2.5-3.5. then obviously it would make sense to fund the 1yr via the rolling - Infact it would make sense to fund the whole book through rolling, but like you say that could have the northern rock scenario brought upon them.
I was with RS for a number of years but in the end got fed up with a number of things. Some of these are
Doing everything they can to reduce rates, this is not a market as RS like to tell us but rates set by RS using all sort of techniques to reduce rates, this has been extensively discussed many times on this forum.
Making changes like the one where they now can fund the PF with interest and capital from in the lenders if they are in trouble, again this was discussed a lot on this Forum.
The product is far too complicated with all the rules and the way the rates are set, although made to look simple. Often described as clear as mud on this forum.
Changes like the one where RS were going to take money from the PF to buy it’s own loans, only changed when there were some many complaints that it hit the national press so RS pulled this change due to bad publicity.
You stated “I don't understand when you say they will take lenders interest to fund the PF”, I think you will find deep in the rules for RS, I assume it is still in place as it came in when I was an investor but as I am not longer an investor I do not now keep a close eye on changes to RS rules.
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alender
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Post by alender on Jan 10, 2019 13:46:07 GMT
The key difference is a technical one. Old rolling your money was only matched for a month and you could select to not relend it. Hence a very real risk there would be loans that needed funding (as already lent), but no one willing to lend today. The new rolling is matched for the loan term, and if you want to get out early you need to have someone willing to buy it off you. Subtle diff but makes a lot of diff if there is ever a cash shortage. So now its functioning like any investment (no guaranteed way to get out) With the monthly market you were guaranteed you repayment on a set date and with the exception of a resolution event you would get your funds on that date, with the Rolling market you need to request funds, wait for a buyer of your loans and only get the funds once sold. If there are no willing buyers you are stuck.
For me it is a significant change not a technical one.
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rscal
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Post by rscal on Jan 10, 2019 14:01:06 GMT
The key difference is a technical one. Old rolling your money was only matched for a month and you could select to not relend it. Hence a very real risk there would be loans that needed funding (as already lent), but no one willing to lend today. The new rolling is matched for the loan term, and if you want to get out early you need to have someone willing to buy it off you. Subtle diff but makes a lot of diff if there is ever a cash shortage. So now its functioning like any investment (no guaranteed way to get out) With the monthly market you were guaranteed you repayment on a set date and with the exception of a resolution event you would get your funds on that date, with the Rolling market you need to request funds, wait for a buyer of your loans and only get the funds once sold. If there are no willing buyers you are stuck.
For me it is a significant change not a technical one. GS offers a[n optional] rolling monthly product (asset-backed loans of course.) It can be managed on some platforms therefore.
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dandy
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Post by dandy on Jan 10, 2019 14:12:04 GMT
The key difference is a technical one. Old rolling your money was only matched for a month and you could select to not relend it. Hence a very real risk there would be loans that needed funding (as already lent), but no one willing to lend today. The new rolling is matched for the loan term, and if you want to get out early you need to have someone willing to buy it off you. Subtle diff but makes a lot of diff if there is ever a cash shortage. So now its functioning like any investment (no guaranteed way to get out) With the monthly market you were guaranteed you repayment on a set date and with the exception of a resolution event you would get your funds on that date, with the Rolling market you need to request funds, wait for a buyer of your loans and only get the funds once sold. If there are no willing buyers you are stuck.
For me it is a significant change not a technical one. I am not sure the part in bold is correct. Resolution event is only relevant if there are PF issues - and is not invoked just because you cannot sell/withdraw. The monthly/rolling market is based on liquidity. What has changed is that now, after 30 days, RS do not re-match your money to someone else automatically unless you select RYI. So I think it IS a "technical" change because if there were liquidity issues under either system you would be unable to get your money out immediately. So the rolling market was not guaranteed before and it is not guaranteed now. It is essentially the same except you now need to actively ask to RYI and take a 14 day penalty.
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Post by oppsididitagain on Jan 13, 2019 10:08:34 GMT
I had 2K matched at 4%. this morning... no big order book showing so I can only presume someone withdrawing ( I was queued behind 120K overnight) However they could be anticipating further rises and just waiting for the 14day block before they get back in - considering 3mil was matched below 2.5% in mid Dec im not too surprised if people were doing this
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aju
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Post by aju on Jan 13, 2019 14:38:01 GMT
I had 2K matched at 4%. this morning... no big order book showing so I can only presume someone withdrawing ( I was queued behind 120K overnight) However they could be anticipating further rises and just waiting for the 14day block before they get back in - considering 3mil was matched below 2.5% in mid Dec im not too surprised if people were doing this How can you see the order book so to speak or do you mean the bit on the left of the rate (Borrowers that is) on the Markets screen, in the full view for a given option this would I guess be the cumulative. Rolling is still showing 4.0% @14:29 although it looks to have dropped back slightly and I just noticed that 6.3% was hitting in the 5yr before I hit the reload button. Its at 6.1% at the moment. Sadly I'm still waiting for some funds to come in from Zopa that I will transfer in. Hopefully it will remain in the high side by the time I get a look in again!.
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Post by oppsididitagain on Jan 13, 2019 15:13:49 GMT
I had 2K matched at 4%. this morning... no big order book showing so I can only presume someone withdrawing ( I was queued behind 120K overnight) However they could be anticipating further rises and just waiting for the 14day block before they get back in - considering 3mil was matched below 2.5% in mid Dec im not too surprised if people were doing this How can you see the order book so to speak or do you mean the bit on the left of the rate (Borrowers that is) on the Markets screen, in the full view for a given option this would I guess be the cumulative. Rolling is still showing 4.0% @14:29 although it looks to have dropped back slightly and I just noticed that 6.3% was hitting in the 5yr before I hit the reload button. Its at 6.1% at the moment. Sadly I'm still waiting for some funds to come in from Zopa that I will transfer in. Hopefully it will remain in the high side by the time I get a look in again!. Yes, The Order book I refer to is the amount of borrowers queueing, I.E. 2K at 3.6. 2K at 3.7. 1.5K at 3.8 etc.. The lenders 5K @ 3.9 200K at 4.0 and so on.. you can then click view full market - As I type this is the order book, So a total of 17K of borrowers waiting to borrow. Borrower Offers Rate On Offer Orders Cumulative 3.8% £4,554.93 5 £4,554.93 3.7% £12.4k 9 £17.0k
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aju
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Post by aju on Jan 13, 2019 15:22:57 GMT
How can you see the order book so to speak or do you mean the bit on the left of the rate (Borrowers that is) on the Markets screen, in the full view for a given option this would I guess be the cumulative. Rolling is still showing 4.0% @14:29 although it looks to have dropped back slightly and I just noticed that 6.3% was hitting in the 5yr before I hit the reload button. Its at 6.1% at the moment. Sadly I'm still waiting for some funds to come in from Zopa that I will transfer in. Hopefully it will remain in the high side by the time I get a look in again!. Yes, The Order book I refer to is the amount of borrowers queueing, I.E. 2K at 3.6. 2K at 3.7. 1.5K at 3.8 etc.. The lenders 5K @ 3.9 200K at 4.0 and so on.. you can then click view full market - As I type this is the order book, So a total of 17K of borrowers waiting to borrow. Borrower Offers Rate On Offer Orders Cumulative 3.8% £4,554.93 5 £4,554.93 3.7% £12.4k 9 £17.0k Ah I see what you mean I hadn't thought of watching the borrowers too, I have been watch the lenders - much easier to gauge when I have an offer in too - but realistically I watch the cumulative there at each level and decide when to stump up. Usually I assume that <400k at a level I am prepared to lend at is likely to take a hit in the next couple of days or so but I am trying to hit it high rates rather than bog standard ones. I am still discovering and learning but seeing it at 6.2 on the 5y i'd be happy when some spare cash comes up. I prefer the longer 5y but when I understand a bit better I might see the shorter term a good ploy too. One thing at a time is my softly softly approach usually.
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corto
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Post by corto on Jan 13, 2019 16:08:09 GMT
5y at 6.4% at the moment
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Post by gravitykillz on Jan 13, 2019 18:00:54 GMT
Just matched 3k at 4%. Best rate i have had since October. Willing to match another 5k if it can get to 4.5%
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