registerme
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Post by registerme on Feb 23, 2016 0:39:55 GMT
RateSetter has, rightly imho, recently experienced a fair degree of scrutiny over how it uses (planned to use) its provision fund. However other platforms, examples that I can think of including Saving Stream and Assetz Capital (but to also include Zopa - I cut them a bit more slack because they did respond to a question I asked here on these forums) haven't. Note, this is not intended as criticism of any of the above, for instance I haven't, and I haven't seen anybody else, asked questions of Saving Stream or AC about how their provision funds are managed, and with an immature and evolving industry it's simply not fair to criticise a platform on the basis of unasked questions. Equally, I think RateSetter are to be commended for the way they responded to the feedback provided, and that should be recognised. But, in the interests of fairness and transparency, we should hold all platforms to the same (best) standards, no? Similarly, it might be useful for the P2PFA to derive some expected standards for provision funds, ie to what use they can be put, what instruments they can be invested in, how many independent directors the should have and so on and so forth. Thoughts? Those from savingstream , andrewholgate , @zopamat , westonkevRS especially welcome  . Needless to say I have likely left out platforms that have provision funds or their equivalent. If anybody knows of any then feel free to reply to this thread with a friendly poke in their direction. Cheers, RM |
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jonah
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Post by jonah on Feb 23, 2016 5:43:14 GMT
SS used to keep theirs 100% in cash in a bank account, as of about September. Can't comment more recently.
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Post by chris on Feb 23, 2016 7:07:55 GMT
AC's three provision funds are kept as cash in the bank.
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Post by westonkevRS on Feb 23, 2016 7:26:33 GMT
Just to make it complicated, the legal structure is different now across platforms. RateSetter was a discretionary trust because in the early days this seemed the most straightforward. However trusts are opaque and have disadvantages when used as a "Provision Fund", this became more apparent with size. So to improve transparency and remove any discretion, the structure was changed: www.ratesetter.com/blog/article/updating-the-structure-of-the-provision-fundSo the first issue for your question (which I like) is that eventually the successful platforms will probably follow suit. What they do now will look very different in the future. Secondly, not all platforms are members of the P2PFA. But if the P2PFA did ascribe standards, then I'm sure RateSetter would adhere. Starters could include: a) Real time reporting of Provision Fund size, b) Business costs that can be approrpriately charged, c) Invested assets, d) Clarity on placement of fund income, e) Circumstances when the lender is covered, f) Coverage ratio, g) Coverage calculation methodology, standards for determination (based on Basel II methodology perhaps), h) Living will triggers, and i) Discretion on lender protection j) Extra-curricular uses of the fund ;-) Kevin. |
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Post by chris on Feb 23, 2016 7:43:14 GMT
To to highlight where our advice and thinking is different to westonkevRS is that we believe the provision fund has to be discretionary to avoid either us being a collective investment scheme or being a captive insurer. In the eyes of the regulator, and with our current permissions, either would be a huge no no. With AC it's also been the case from the start that the funds are not lender funds, they are AC funds put aside into a trust for this specific purpose (as I understand it). So we haven't had to take lender funds and make them company funds through a change in structure or anything like that. We're looking at being more transparent ourselves, in line with what westonkevRS has published in this thread. The size of the fund is reported in real time but I would like to make it more prominent. All funds are currently held as cash, although that's liable to change as the fund(s) grow in size so I'd like us to publish our strategy for that as soon as it's been set out. We currently have a flat 5% target of invested funds but we're likely to change that to be some multiple of the expected bad debt that we would then publish in real time. There are no extra curricular activities for those funds and we would fall foul of the FCA's financial promotions rules were we to use them for something we didn't disclose to the lenders (in our view). |
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webwiz
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Post by webwiz on Feb 25, 2016 23:22:08 GMT
If a PF is discretionary it does not need to be treated like client funds. The platform can pretty much do what it likes. As lenders we are purely reliant on the reputational risk to the platform I'm afraid. The PF of a platform is similar to a PG from a borrower.
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Post by propman on Feb 26, 2016 8:24:03 GMT
If a PF is discretionary it does not need to be treated like client funds. The platform can pretty much do what it likes. As lenders we are purely reliant on the reputational risk to the platform I'm afraid. The PF of a platform is similar to a PG from a borrower. You don't usually get to check what the parent is worth in real time with a PG!
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webwiz
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Post by webwiz on Feb 26, 2016 11:23:24 GMT
I should have said "similar in terms of its worth"
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pikestaff
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Post by pikestaff on Feb 26, 2016 14:19:58 GMT
If a PF is discretionary it does not need to be treated like client funds. The platform can pretty much do what it likes. As lenders we are purely reliant on the reputational risk to the platform I'm afraid. The PF of a platform is similar to a PG from a borrower. No because there will be a trust deed governing it. The discretion is there for legal and tax reasons. I am more comfortable with a discretionary trust arrangement than I am with the PF subsidiary now operated by RS, which gives RS more power and I think blurs the line as to whether we or RS are the true lenders. This may be the analysis underlying chris's collective investment scheme point. I also understand AC's captive insurer concern.
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