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Post by carol167 on Apr 7, 2017 20:05:17 GMT
Ok so I was bored. And finding myself on the main LendingWorks screen (as you do), I noticed it says "Insurance-backed" but then says "Your capital is at risk". Surely either it's one or the other, I can't see how you can say it's both (or it's insurance backed up to a certain point and the rest is at risk). Potentially confusing. So I got to wandering around the charts just to see what the default rates are like out of curiosity and I noticed a few things.... Firstly the "Actual v expected lifetime defaults" charts on the following page www.lendingworks.co.uk/peer-to-peer-lending/statistics/risk-and-returnaren't displaying the X axis descriptions of the pretty colours properly. The writing is chopped more than halfway vertically so they're sort of unreadable. I'm guessing they say "Expected" for black and "Actual something something" for the blue and orange. (I'm using Firefox). Secondly... Where is the chart for 2016 ? Given that in 2015 it looks like defaults were more than expected, I was curious to know what 2016 looked like. There really ought to also be one for 2017 so far (updating possibly monthly). You don't need me to point out that lack of current information is poor practise and doesn't look good. :-) Thirdly am I reading this correctly ? It says Bad debt rate coverage is 2.28%. Yet, estimated lifetime bad debt rate for 2017 is 2.5%. Doesn't that suggest that there isn't enough coverage ? Or am I completely misreading things ? |
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Post by Matthew on Apr 7, 2017 22:36:39 GMT
Ok so I was bored. And finding myself on the main LendingWorks screen (as you do), I noticed it says "Insurance-backed" but then says "Your capital is at risk". Surely either it's one or the other, I can't see how you can say it's both (or it's insurance backed up to a certain point and the rest is at risk). Potentially confusing. So I got to wandering around the charts just to see what the default rates are like out of curiosity and I noticed a few things.... Firstly the "Actual v expected lifetime defaults" charts on the following page www.lendingworks.co.uk/peer-to-peer-lending/statistics/risk-and-returnaren't displaying the X axis descriptions of the pretty colours properly. The writing is chopped more than halfway vertically so they're sort of unreadable. I'm guessing they say "Expected" for black and "Actual something something" for the blue and orange. (I'm using Firefox). Secondly... Where is the chart for 2016 ? Given that in 2015 it looks like defaults were more than expected, I was curious to know what 2016 looked like. There really ought to also be one for 2017 so far (updating possibly monthly). You don't need me to point out that lack of current information is poor practise and doesn't look good. :-) Thirdly am I reading this correctly ? It says Bad debt rate coverage is 2.28%. Yet, estimated lifetime bad debt rate for 2017 is 2.5%. Doesn't that suggest that there isn't enough coverage ? Or am I completely misreading things ? Hi carol167I'll see if I can address your queries... The term "insurance-backed" refers to the insurance policies we've taken out against some of the reasons for borrowers defaulting - part of our Shield which helps protect lenders against defaults. It is not intended to imply any form of guarantee, so it's interesting you interpreted it in that way - this is something I will raise internally and consider re-wording. As with all forms of investment, where return of capital is not guaranteed this must be clearly and prominently stated (see FCA Handbook COBS 4.2 for example). As noted above, while the Shield seeks to ensure lenders are not impacted by individual defaults, it cannot provide a guarantee in the same way the FSCS might on a savings account. Regarding the graphs, I can't seem to see what you're seeing - if you could let me know the device you're using or send a screenshot to our customer service team, we can take a look. Anyway, blue is actual to date and orange is latest projection based on performance to date plus forecast remaining. We don't graphically show actual v expected until the cohort is 6 months mature (from the last day of the relevant period), so this will be mid-way through 2017 for the 2016 cohort. This is to allow sufficient seasoning to make a meaningful graph. We do however show the data for the actual defaults to date for that year. I'll take your comments on board regarding "lack of current information" - it's certainly not that it has been neglected or is out of date (we update once per month in line with P2PFA principles). Perhaps we could offer more explanation around the graphs. Noted. Publishing the "coverage rate" is mandated by the P2PFA for firms with provision or reserve funds. However, the "operating principles" don't account for the fact that we have insurance to cover some of our defaults (so the reserve fund is not always called upon). Anyway, that's what it is. There are a couple of relevant points to note regarding your observations. The capital outstanding balance includes loans from 2014 - 2017, so the 2.5% applies to only a small part of the overall outstanding balance. The level of remaining defaults on earlier (seasoned) cohorts is lower. In addition, the coverage rate assumes the reserve fund would need to pay out in every case i.e. no claims would be made on the insurance - this is not the case in practice. Finally, in many cases, defaulted loans are actually on long term payment arrangements where recoveries are being received on a monthly basis (albeit at reduced repayments) - therefore the net loss to the Shield is less than the gross defaults recorded. Hope this helps. Have a good weekend.
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Post by carol167 on Apr 8, 2017 8:18:57 GMT
Thanks Matthew for your detailed reply, definately helpful... but with regards to the charts - this is what I see.(see attachment) The legend is not diplaying correctly. It's like that on all the charts. I'm using Firefox v52.0.2 (32-bit) on windows 10 on a main desktop machine. ![]() With regards to 2016 chart missing - makes perfect sense what you've said - but perhaps a screen message in the appropriate place to mention that so people don't go - oh, why is 2016 not showing ? Off out into the sunhine for a walk ... Have a good weekend yourself :-) Attachments:
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