wapping35
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Post by wapping35 on Nov 1, 2016 10:28:43 GMT
I believe it is the first time it has gone below that 125% target range..
Perhaps a new target range is needed ? 100%-125% anyone..?
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Post by unknown on Nov 1, 2016 11:05:04 GMT
If I recall correctly, the amount in the provision Fund hasn't changed much but the expected losses have increased. Correct me if I'm wrong.
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wapping35
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Post by wapping35 on Nov 1, 2016 13:08:10 GMT
I think you are partly correct. Expected losses have been reduced from 2.8% to 2.6% recently (last 1-2months from memory) and now they are back to 2.8%. However when the expected losses were 2.8% the PF ratio stood at around 131% (from memory). It was at 129% when it was 2.6% (yesterday morning) and now it is down to 120%. Effectively when the Expected losses went down to 2.6% the PF coverage ratio did not rise by a corresponding amount.e.g 2.8/2.6 x 131% = 141%. I have a question with RS about which of their ratios on their website is correct and they have responded to say they are investigating. Edited to add the Target PF range screen shot:
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mark123
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Post by mark123 on Nov 1, 2016 16:27:17 GMT
Hi, If I have got my figures right, the trend is pretty clear and rather concerning. I think the data (rounded for clarity) is: Date | 26 Oct 2015 | 21 Sep 2016 | 1 Nov 2016 | Provision fund cash | £16m | £17m | £16m | Provision fund future | Nil | £6m | £6m | Expected bad debts | £10m | £18m | £18m | Coverage cash | 160% | 100% | 90% | Coverage total | 160% | 130% | 120% |
Any comments from Ratesetter? Regards, Mark
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jlend
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Post by jlend on Nov 1, 2016 17:21:06 GMT
Hi, If I have got my figures right, the trend is pretty clear and rather concerning. I think the data (rounded for clarity) is: Date | 26 Oct 2015 | 21 Sep 2016 | 1 Nov 2016 | Provision fund cash | £16m | £17m | £16m | Provision fund future | Nil | £6m | £6m | Expected bad debts | £10m | £18m | £18m | Coverage cash | 160% | 100% | 90% | Coverage total | 160% | 130% | 120% |
Any comments from Ratesetter? Regards, Mark From Ratesettter. They have posted this on their blog page in response to a question I posted there. So I think we have seen the last post from Ratesetter on the P2P forum "Kevin did a great job of representing RateSetter on the P2P independent forum, but this was not actually part of his formal role and we are not planning to create a new position with that responsibility. Our communications with investors will continue to be delivered via this blog, RateSetter Notices, through direct emails and our Customer Services team. As always, queries and comments can be directed to us by contacting our Customer Services at contactus@ratesetter.com or 020 3142 6226 or via the blog's comments section."
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ashtondav
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Post by ashtondav on Nov 1, 2016 18:51:37 GMT
Ratesetter have gone into "lock-down" and are refusing to engage with their customers about important parts of their business model. We all know what happens when companies decide to adopt this approach, don't we? It means they either don't understand their business model, or they have no confidence in it. There is no other conclusion to be drawn.
If the penalties were not so severe, i'd sell up and move on.
Why stay with a company that has, as a part of its strategy, a policy of ignoring customers? Is that normal? Is that rational? Does it have any shred of business benefit?
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nairda
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Post by nairda on Nov 1, 2016 20:07:29 GMT
I am now very concerned about RS. I have been drawing down my investments for a while now but my wife has continued to reinvest her capital and interest. I think the time has come for her to start drawing down too and we may even cash in some loans.
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jnm21
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Post by jnm21 on Nov 2, 2016 1:44:38 GMT
Ratesetter have gone into "lock-down" and are refusing to engage with their customers about important parts of their business model. We all know what happens when companies decide to adopt this approach, don't we? It means they either don't understand their business model, or they have no confidence in it. There is no other conclusion to be drawn. If the penalties were not so severe, i'd sell up and move on. Why stay with a company that has, as a part of its strategy, a policy of ignoring customers? Is that normal? Is that rational? Does it have any shred of business benefit? All very worrying. We must wonder why a company would stop providing information through a valuable channel? All the best to westonkevRS, whatever the situation may be. For once I am glad to seemingly be a small fry investor (I have seen a couple of large 4 & 5 digit sums mentioned - I would not sleep if that were the case - with 2K at stake I still study the PF stats, for what value they still have, & keep my ear to the ground)! I really do not like how RS are moving the goal posts, seemingly without the courtesy to even tell us!
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jlend
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Post by jlend on Nov 3, 2016 7:33:36 GMT
I see the coverage ratio has dropped to 119% today.
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Post by bricktop on Nov 3, 2016 8:04:29 GMT
I see the coverage ratio has dropped to 119% today. Must have put a big chunk in to bad debt recently then. Mid year review maybe?
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wapping35
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Post by wapping35 on Nov 3, 2016 11:21:05 GMT
I have just written again to RS CS for an explanation of the inconsistent default rates on their website (that is the excel down loads v the web page #'s), why the website projected default rate went up on Monday from 2.6% to 2.8% (the rate it was only 6 weeks ago) and why the coverage ratio has fallen 10% since Monday, 129% to 119% (which I have noted is below their own stated 125% minimum risk tolerance range).
Can I suggest if others would like to know as well they too email, especially since there is no RS representative now on this forum.
I should add i do take the point that the importance of this issue probably means it should be communicated by RS on their website and a direct e:mail to all lenders as opposed to just this forum.
W35
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jlend
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Post by jlend on Nov 3, 2016 18:20:32 GMT
The way the provision fund works is changing and a new ratio is being introduced.
There is a blog about it on the ratesetter website.
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wapping35
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Post by wapping35 on Nov 3, 2016 20:16:01 GMT
Thanks I see that Blog post has just appeared today. I will also however await their response since whilst the blog explains why they consider a ratio of well below 150%-125% as okay, due to this "discounted lifetime interest on existing loans" now being taken as a tangible PF asset (personally I am not convinced given it is illiquid, but it is an explanation), it does not answer: 1) Why the Projected Bad Debt increased from 2.6% to 2.8% on Monday 2) The Coverage Ratio falling 10% (129% to 119%) in 3 days. 9% of which on Monday. 3) Why on the PF page there are conflicting data sets (actual historic default rates 2014-16) . RS has previously indicated by email to me that they will confirm which of those numbers are correct and which are incorrect, presumably they will also correct the incorrect data. I have pasted the link to the blog. It took me at least a bit of time to find it. Thanks again, W35 www.ratesetter.com/blog/article/responding-to-feedback-on-provision-fund-flexibility
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mark123
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Post by mark123 on Nov 3, 2016 20:35:57 GMT
As I read the blog post, there will be a new lender contract from 1 Mar 17 which changes how they report on the fund and what happens it it is insufficient.
I don't know if RS can unilaterally change the contract for existing loans or only for new loans.
I think that the old scheme was: not enough money in the provision fund -> resolution event.
And the proposed scheme is: not enough money in the fund -> use (our) future interest to top up the fund and, if necessary, use (our) future capital repayments to top up the fund.
This seems to be a lower risk arrangement. For example as a 5% shortfall in the provision fund means that we would lose our interest and a little capital, rather than the drastic resolution event.
The downside is that RS can run with a lower safety margin because a provision fund shortfall does not necessarily mean the end of the business.
Do others think I have understood the essence of the proposed change?
Regards, Mark
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mark123
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Post by mark123 on Nov 3, 2016 20:45:18 GMT
I thought it would be helpful to post the illustration from the blog which shows how the expected losses relate to: a. provision fund cash b. cash plus future income c. cash plus future income plus loan interest Provision Fund contributions | 16,000,000
| Provision Fund Contractual Future Income (discounted)
| 6,100,000
| Provision Fund total value
| 22,100,000
| Expected losses
| 18,400,000
| Provision Fund coverage ratio
| 120%
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| Provision Fund total value
| 22,100,000
| Lifetime interest on existing loans (discounted)
| 31,700,000
| Provision Fund + interest buffer
| 53,800,000
| Expected losses
| 18,400,000
| Capital coverage ratio
| 292%
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I guess the illustration is based on current figures. Please like this post if you would like me to post update figures from time to time so we can keep track of trends. Regards, Mark
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