robski
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Post by robski on Jul 2, 2020 16:47:41 GMT
Ok, I understand you now. I agree that RS could certainly change the way the PF funds defaults, from a 3 month cutoff, to full loan lifetime, which would hugely improve their PF cash position. As you say, the only reason not to do that is the interest payable, but as they reduce the interest that looks increasingly attractive from all perspectives. Perhaps they will read this forum and implement your suggestion! That suggestion is simply a way of delaying the inevitable by burying ones head deeper in the sand, so might well be attractive to RS. It would have some merit if RS was profitable pre-covid and they were able to hit their PF targets, as it would buy time until normal market conditions returned. Unfortunately, neither of those conditions was true. So, unless the economic conditions are about to become far more favourable, where lenders are prepared to lend for lower interest rates and far fewer borrowers default, which seems extremely unlikely, it just delays the point at which capital reductions need to be declared. It would also lead to larger losses for the unfortunate lenders that failed to escape in time. Your combining two very different things here. People really need to be much clearer in this regard The profitability of RS themselves is irrelevant to the PF. The PF could be £30M in cash, and yet if RS continue to be highly unprofitable the PF would not stop them going into administration/receivership/liquidiation (depending on quite the issue) So lets remove that red herring. (I am not saying its not an issue it is and always has been, if anything during COVID they are probably more profitable/less loss making) since staff will likely be furloghed who deal with new business and they must be making quite a lot from sell out fees. Going back to the PF. Most peoples concerns seems seem to be be about cash in particular and the general state of the PF. Slowing down the cash draw would make little difference to the end position, as I said in theory it costs a bit of interest, thats all, they cannot change which loans will go bad and when. What they can do is change when they take on the full loan to the PF. Its far easier for them to be more dynamic over a longer timescale than they need to be in a shorter one. There is zero inevitability for the PF to run dry, in fact I would argue under the t&Cs is impossible for the PF to run dry IF, and its a big one, RS would choose to do a capital haircut. Look to the extreme for why this is the case, they apply a 100% capital haircut. The PF just went to £800m I cant believe if they start to get into the area of having to do capital haircuts (if this is on repayments or as a one off) that they wouldn't look to reduce the drain on the PF first, seeing as its completly open to them to be able to do so in a lot of cases. As I said some cases would be impossibe such as ignoring an IVA or bankruptcy etc, but for normal loans nothing forces them to make a full repayment to lenders after 3 months, thats 100% choice on their part. Changing the timing of the PF will improve the position for lenders not worsen it. As there are illiquid assets in there, the longer the horizon, the more chance of them converting into liquid ones over time, such things as the bad loan sales they make. The cashflow from the borrowers is likely more stable under RS than if there was a "takeover" with an administrator gouging fees. Right now there is very little lending going on, I agree they are unlikely to be able to write loads of business whilst there is an interest haircut going on. Whether the market can get to a position of more sensible borrower rates which would allow RS in theory to make a margin who knows. There is certainly evidence of less silly low rates as banks etc are starting to factor in increased risk (decreasing LTV rates etc for mortgages)
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Post by shanghaiscouse on Jul 2, 2020 17:27:50 GMT
Right now there is LOTS of lending going on, but all under the government CBILS schemes which have a treasury guarantee, and which appear to be available to absolutely anyone with no valid reason necessary. With that as competition, how can a commercial lender like RS compete? They can't. So better to stop lending, furlough your lending staff, and try and sell yourself!
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coogaruk
Hello everyone! Anyone remember me?
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Post by coogaruk on Jul 2, 2020 17:49:44 GMT
Look to the extreme for why this is the case, they apply a 100% capital haircut. The PF just went to £800m Isn't most of that capital with the borrowers?
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Post by diversifier on Jul 2, 2020 19:44:28 GMT
Ok, I understand you now. I agree that RS could certainly change the way the PF funds defaults, from a 3 month cutoff, to full loan lifetime, which would hugely improve their PF cash position. As you say, the only reason not to do that is the interest payable, but as they reduce the interest that looks increasingly attractive from all perspectives. Perhaps they will read this forum and implement your suggestion! That suggestion is simply a way of delaying the inevitable by burying ones head deeper in the sand, so might well be attractive to RS. It would have some merit if RS was profitable pre-covid and they were able to hit their PF targets, as it would buy time until normal market conditions returned. Unfortunately, neither of those conditions was true. So, unless the economic conditions are about to become far more favourable, where lenders are prepared to lend for lower interest rates and far fewer borrowers default, which seems extremely unlikely, it just delays the point at which capital reductions need to be declared. It would also lead to larger losses for the unfortunate lenders that failed to escape in time. I don’t think that’s quite fair. Doing that wouldn’t change the net position of the PF, only the additional cashflow issue between ICR 0% and 50% - which RS don’t draw attention to anyway, and only becomes apparent if you drill down the figures. So it isn’t a means of indefinite can-kicking. If you think that capital loss is *inevitable* (which I don’t), then yes it defers capital loss from a short-term tier of RYI’ers. But actually.....if ICR does go below 50%, RS would have to decrease interest rates further. Even more quickly, investors will turn off re-investment, which would be the end of RYI flow pretty much. So, I reckon the gap would apply to only a tiny minority in practice, and by symmetry the effect on the rest is even tinier. Basically, everybody needs to hope that RS current plan is sufficient to cover defaults, as there is no other exit than via loan duration for the majority.
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robski
Member of DD Central
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Post by robski on Jul 2, 2020 21:07:44 GMT
Look to the extreme for why this is the case, they apply a 100% capital haircut. The PF just went to £800m Isn't most of that capital with the borrowers? Yes, but the PF is made up of current cash and future income streams If they literally took all the capital because "needs" then they would have all the future income in the PF and no payments out to make I suspect they would need some cash in RS itself though to fight the legal cases But the point is there is no need for the PF to run out of funds, the challenge is keeping the liquid funds above zero, its actually why taking part of funds coming in is better since its cash as opposed to future income
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Post by Ace on Jul 2, 2020 22:41:33 GMT
OK, I accept that stating that capital losses were *inevitable* was a bit too strong. There is a chance that cutting investor interest to zero could be sufficient to reverse the continuing decline in the PF position and allow us all to escape with capital intact. Or that RS come up with yet another tweak to the platform strategy that turns out to be the magical tweak that keeps lenders and borrowers happy and reverses the fortunes of the ever decreasing PF. I believe that both are extremely unlikely given RS's track record and the probable increase in defaults to come, but neither are completely impossible.
Trusting that RS have some credible forecast data that they are unwilling to share and predicts the recently published decrease in the ICR and predicts that it will return to 100% by Christmas is a credibility step too far for me.
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Post by RateSetter on Jul 29, 2020 11:51:33 GMT
Good afternoon. Today we have completed the usual monthly update of data on the statistics page and alongside we have published the monthly Provision Fund commentary, which you can find in the RateSetter Notices section of your account, copied below for reference:
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johnt
Investing in Ratesetter, Zopa and Assetz Capital since 2013
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Post by johnt on Jul 29, 2020 12:39:44 GMT
Good afternoon. Today we have completed the usual monthly update of data on the statistics page and alongside we have published the monthly Provision Fund commentary, which you can find in the RateSetter Notices section of your account, copied below for reference: Really?? No change at all?!
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starfished
Member of DD Central
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Post by starfished on Jul 29, 2020 13:49:50 GMT
Really?? No change at all?! It is almost as if they are toying with us
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jlend
Member of DD Central
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Post by jlend on Jul 29, 2020 16:32:31 GMT
The positive takeaway is that the coverage ratios haven't fallen as they did at the last update.
Also that defaults are currently as RS expected at the time of the interest rate cut.
The amount of cash in the PF is lower but then the loan book has shrunk.
Be good to watch over the next few months to see if the coverage ratios slowly improve as the economy improves or whether we see another dip in the ratios. It will take many months before RS have a good picture of how many borrowers can get back to normal repayments IMHO.
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Post by james91 on Jul 29, 2020 17:33:52 GMT
Does anyone have a tracker for this? I tried the google sheet in the original post, but hasn't been updated for a long time. Thanks
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aju
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Post by aju on Jul 29, 2020 19:09:32 GMT
Don't forget this data is for June not July it's a month late as defined in the first statement of the document.
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iRobot
Member of DD Central
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Post by iRobot on Jul 29, 2020 19:44:48 GMT
Does anyone have a tracker for this? I tried the google sheet in the original post, but hasn't been updated for a long time. Thanks Tagging r00lish67 as I know he's a keen observer / commentator on the RS PF / ICR. (His last post had him at an airport about to commence his travels, so it may be a while before he can respond.) In the meantime, take a look at this mid-May post (noting particularly the edit) and consider how the end of the Gov's furlough scheme in October and the increasing contributions expected from employers during Augusts and September might affect unemployment, and with it, borrowers ability to service debt. I signed up to RS pre-CV19, but it was, amongst others, r00lish67's cautionary notes re: the PF / ICR which gave me cold-feet - it felt like yet more P2P platform obfuscation and reliance on hope values - and I never invested. Left everything in AC instead!
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Post by Deleted on Jul 29, 2020 20:53:57 GMT
Does anyone have a tracker for this? I tried the google sheet in the original post, but hasn't been updated for a long time. Thanks This is my record. The dates are roughly when the stats were published rather than the effective date.
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Post by freefalljunkie on Jul 30, 2020 8:10:15 GMT
Not really sure what to make of this latest update from RS. I suppose it is good that the coverage ratios haven't dropped further, but shouldn't they be going up with two months of the interest rate haircut included in these figures? If the PF isn't at least showing signs of starting to head in the right direction by now it surely doesn't bode well, especially with a likely unemployment spike coming in the autumn. What are others thoughts on whether a capital haircut can still be avoided?
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