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Post by davee39 on Aug 3, 2020 17:29:12 GMT
RS were undone by the prolonged effects of the 2008 crash and the resulting low interest rates and BOE splash the cash. Covid merely speeded up the failure.
They were struggling to compete due to the added charges needed for the PF and the rates demanded by lenders. To compensate they reduced pf contributions
leading to a significant drop in coverage, and then kept rearanging the pf fund furniture to try to make it look appealing. They then invented the access accounts,
which were designed to pay lenders less, while earning more from borrowers. A sleight of hand that only worked if no one was looking.
Covid exposed these issues, RS was already on a downward spiral.
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pip
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Post by pip on Aug 3, 2020 17:56:25 GMT
RS were undone by the prolonged effects of the 2008 crash and the resulting low interest rates and BOE splash the cash. Covid merely speeded up the failure. They were struggling to compete due to the added charges needed for the PF and the rates demanded by lenders. To compensate they reduced pf contributions leading to a significant drop in coverage, and then kept rearanging the pf fund furniture to try to make it look appealing. They then invented the access accounts, which were designed to pay lenders less, while earning more from borrowers. A sleight of hand that only worked if no one was looking. Covid exposed these issues, RS was already on a downward spiral. These are all good points but none of them are why Ratesetter failed. If you want a list of risks to ratesetters model I could write pages and pages. Ratesetter failed because there was a short term economic shock which meant that many more loans than was previously expected are now likely to default and the result was a liquidity crisis. Oh and also the government is now underwriting loans to small businesses which are so risky and at such low rates that any competitor to this will lose money. Combined this meant that ratesetters main source of cash, new loans issued and access to capital markets dried up.
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coogaruk
Hello everyone! Anyone remember me?
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Post by coogaruk on Aug 3, 2020 18:05:15 GMT
At least no-one's blamed Brexit yet  |
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aju
Member of DD Central
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Post by aju on Aug 3, 2020 18:51:14 GMT
If we are not careful the speed this one has moved to 6 pages could be contender for the covid 19 thread race...  mind you it seems to have slowed down now. I've read quite a bit now but I'm still puzzled over how this benefits RS at all, since as far as I can tell there will be no new lenders and then only secured after Q4. Difficult to see why RS would even need all the changes they have made over the last weeks or so anymore. Ok so its still to be confirmed but it does look like Metro does not really want anything to do with us lenders so why would we stick around - if you don;t want/need my custom i'll just go elsewhere. All we need now is for Zopa to do the same and there will be little left of the P2P markets for the likes of myself and many others on these forums that stick with comfort rather than having to understand the more out there P2P offerings. Perhaps I should move to Australia where RS is being retained. Edit: Actually know the covid thingy is causing quite a bit of consternation in ozzy world at the moment... |
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Post by stevepn on Aug 3, 2020 19:10:06 GMT
I don't look at it as good news for existing investors. It looks like investments will be returned slowly as borrower's contracts expire. There will be no new investors to buy up contracts. No new borrowers either. One of my contracts has just been repaid nine months early, so hopefully more borrowers will do the same.
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beagle
Investor in ratesetter, funding circle, lendy (lesson learnt) and AC
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Post by beagle on Aug 3, 2020 19:12:28 GMT
i think its a result
administation would be more costly
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Post by zs on Aug 3, 2020 19:28:14 GMT
'With that said, RateSetter will continue to manage the existing RateSetter loan portfolio and “Provision Fund” on behalf of its existing peer-to-peer investors, “with Metro Bank assuming no credit risk for these existing loans.”' techcrunch.com/2020/08/03/metro-bank-ratesetter/ |
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Post by gar on Aug 3, 2020 20:17:46 GMT
Wow, good news, bad news, who knows, theres been an explosion of posts on this thread today, I have read through loads at the front at end of the thread and just cant read any more.
The consensus up to the point where could not read any more was basically, Metro can do what ever they want, once they have their hands on the dosh.
Surely the FCA are going to put obligations on Metro to make sure existing investors are not going to get fleeced if Metro takes a mind to doing so.
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Post by Badly Drawn Stickman on Aug 3, 2020 21:04:46 GMT
Maybe I am just unpopular, but did not receive any kind of email regarding this. Maybe nobody did?
Which does sort of raise the question as to why it would be posted on a forum (yes we would have discovered it fairly quickly anyway)
I would tend to see the deal as an overall positive thing, but only really removes one potential problem (platform failure) and maybe raises more questions elsewhere.
If no email, why not? Clearly it is of importance to all investors.
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Post by Ace on Aug 3, 2020 21:37:10 GMT
From the announcement today:
My bold.
This doesn't say anything about RS's 'secured' lending, i.e. auto and property type lending. I initially assumed that RS would be shutting its doors to all retail lending once the Metro deal is approved, but I don't recall seeing that explicitly stated. Have I missed something?
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Post by james91 on Aug 3, 2020 21:45:40 GMT
Not sure if I'm being naive, but I generally see this as good news.
The risk of the loan book being handed over to administrators with very little interest or incentive to ensure investors see their money returned, has been significantly reduced. Ratesetter will continue managing the portfolio, and have a good track record (of course nothing certain with everything going on though). Obviously not going to get our money back any quicker, but the likelihood of eventually getting it back, or most of it back, has surely increased.
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macq
Member of DD Central
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Post by macq on Aug 3, 2020 22:41:29 GMT
i will be the first to admit i may have missed something and not had time to read all the thread(or the One on MSE) - but
Metro seem happy to use/want the RS infrastructure & DD etc to arrange loans and use their deposit money to fund it (but i assume with no PF)
They also want RS to either run out the present loan book (with no comeback on them) or to even continue maybe as a separate product with PF
That's how i see it but it begs Two questions - Why would Metro want to keep RS going as a retail p2p platform when they have just had to save it.What has changed for RS in its present form if all they do is take the tech and backroom staff and then just let it run as it is now and run the risk of bad publicity further down the line for a part of the new company?
And would the FCA not see it as conflict of interest to have two forms of lending product offered by the same company but with different rules but maybe using same money/loans?
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Post by gar on Aug 4, 2020 5:18:06 GMT
i And would the FCA not see it as conflict of interest to have two forms of lending product offered by the same company but with different rules but maybe using same money/loans? Indeed, on the face of it RS is a prime candidate to have its assets stripped, Metro have all ready stated they are not interested in the bad bits of the company. In my opinion the FCA should make them take RS as a company warts and all. The dynamic has changed, RS will now be owned by a bank and Metro ought to be made responsible for what they are getting by giving full FCA cover for the loan book. Cherry picking the lucrative bits is not equitable in my opinion.
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Post by Badly Drawn Stickman on Aug 4, 2020 6:20:32 GMT
i And would the FCA not see it as conflict of interest to have two forms of lending product offered by the same company but with different rules but maybe using same money/loans? Indeed, on the face of it RS is a prime candidate to have its assets stripped, Metro have all ready stated they are not interested in the bad bits of the company. In my opinion the FCA should make them take RS as a company warts and all. The dynamic has changed, RS will now be owned by a bank and Metro ought to be made responsible for what they are getting by giving full FCA cover for the loan book. Cherry picking the lucrative bits is not equitable in my opinion. I take it that when you say 'full FCA cover' you actually mean FSCS? Given that the man with the colander is already responsible for emptying water from the boat. I doubt that is much of a possibility, ensuring the integrity of the PF is a more realistic hope.
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tjtl
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Post by tjtl on Aug 4, 2020 6:48:25 GMT
If Metro Bank had been required to provide full FSCS cover to all of the existing loan book as a condition of doing the deal to acquire Ratesetter they wouldn't have gone ahead and bought it - it is as stark as that. Look at the price Metro managed to negotiate- £2.5m (rising to £12m if certain targets are set - but that after 3 years)- it is , for Metro, a marginal deal. If it was more expensive for them (and full cover of the loan book would have made it far more expensive) they would have walked away- and then what would have happened? It is pretty clear what would have happened- the business would be in wind-up mode.
Metro bank buying the business provides security for the platform, and little else. I don't think it has altered the risk profile for any of the loans we are exposed to- we have the same prospect of a capital hair-cut as we had before. What it does do is reduce the risk of the platform going under, and a messy, unpleasant, expensive (choose your own adjective) administration.
Ratesetter had Lazard acting for them- and all that Lazard could screw out of Metro bank was £2.5 million up front (barely enough to cover Lazard's fees I suspect). The purchase of RS is a rescue bid- one step away from a pre-pack.
Please forget ay hopes that we suddenly get full FSCS cover or Metro Bank shareholders will bail us out- we are still on the same ship that was taking on water, and still is.
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mind you it seems to have slowed down now.
