rscal
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Post by rscal on Aug 25, 2020 10:24:07 GMT
But at the same time this is why people are generally selling.
It might be interesting to make a table to see what loans are going Untradeable and try to work out their impact, certainly thinking about it ...
The £10 first invested after a downgrade would exclude the 'bad loan' and so would be marginally more valuable for the buyer than the seller ('cos the seller's holding concentrates on the bad) Subsequently if more loans go 'bad' the new investor is marginally (but differentially) degraded also. This suggests a narrowing of discount to me, b/c part of the discount is a premium for buying into a future loss/uncertainty and the rest is a premium for being confident in the residual portfolio. And by splitting off the 'bad' Assetz is lending some certainty to proper valuing of the whole portfolio.
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blender
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Post by blender on Aug 25, 2020 10:25:21 GMT
I guess that the immediate effect is that many of the competitive bids will have been immediately removed while the bidders assess the new information - and so discounts have increased - currently just over 10%. The problem for flippers is presumably that any purchases at discount now will include loans which may later become untradeable, and with which they may be stuck. While in the future, when trades exclude loans which will then be untradeable, discounts should be lower to reflect the fact that some quarantined loans (the appropriate word in some many ways) have been excluded from sale. Does this also affect withdrawals from the Access Accounts? Can you ever withdraw fully from the QAA/30D/90D (names from an earlier era) if those accounts are like the proverbial can of sardines with the key, in that however hard you try there there will always be that small inaccessible piece in the corner that you just cannot get out?
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garfield
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Post by garfield on Aug 25, 2020 10:29:28 GMT
How can this work when the 30D and 90D AAs have to be drawn through the QAA? That is, if my understanding is correct that the loans suspended on each account may differ according to the size of each of the PFs. Surely it can only work if there's just one PF across all AAs?
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SteveT
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Post by SteveT on Aug 25, 2020 10:35:25 GMT
How can this work when the 30D and 90D AAs have to be drawn through the QAA? That is, if my understanding is correct that the loans suspended on each account may differ according to the size of each of the PFs. Surely it can only work if there's just one PF across all AAs? They don't. It's only if a 30DAA/90DAA lender wishes to sell out at a discount that they have to transfer their holdings across to the QAA. There are certainly separate PFs for the 3 AA accounts, and the 90DAA PF is certainly the least well funded. What's yet unclear is whether a notice-expired 90DAA withdrawal can be transferred to the QAA in full (suspended loans and all, presumably along with its share of the 90DAA PF) or whether the suspended loans must remain in the 90DAA.
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iRobot
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Post by iRobot on Aug 25, 2020 10:50:34 GMT
My 10¢ worth ... 1) An Access Account Market Place (AAMP) was mooted for weeks / months and delivered on Wednesday, 12th of August. 2) Nine days later, on the 21st of August, an email is sent titled: "Reinvesting your interest via the Access Accounts", explaining the impact of the AAMP and how to utilise it to re-invest interest, should the lender choose to. 3) Today, not even a fortnight after the launch of the AAMP, AC send an email outlining "Important Information" around the Provision Fund's future performance. It seems to me that 3) was predictable - by those who have the responsibility and information available to make these important forecasts - and could and should have been communicated before events 1) & 2). If not predictable - maybe the FCA have re-interpreted something somewhere causing AC to re-evaluate the Ring-Fencing situation - then the effects of releasing 3) after 1) and 2) were definitely predictable, and a pausing of the AAMP to allow lenders time to evaluate the new information and decide whether they wanted to cancel or amend buy/sell/re-invest instructions would not have been a bad idea, IMO. I've been broadly supportive of AC's response to the CV-19 situation, but as an outsider looking in, they definitely seem to have gotten the cart before the horse on this one. PS: I don't see any information about the potential impact to the Provision Fund / Ring Fencing on the AC website. Appreciate that, in essence, nothing has actually changed - this is just a flagging of something that always could happen becoming significantly more likely to happen - but I might have expected to see an update to " Access Accounts update" page which was last updated to reflect the availability of the AAMP. At least that page is available to those perhaps looking to sign up to AC and therefore won't have received the email. |
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blender
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Post by blender on Aug 25, 2020 10:53:45 GMT
Guess we will all have the same mix of the 'clean' AA loans, which can be traded, but we will now start accumulating small untradeable parts of 'quarantined' loans which will remain in the various accounts we hold. Messy. A good job we are all 'sophisticated' investors, because there is no chance of explaining all this to those who are not. A major benefit of the Access accounts was their simplicity in normal market conditions, in that they looked like saving term-accounts.
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garfield
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Post by garfield on Aug 25, 2020 11:02:43 GMT
Guess we will all have the same mix of the 'clean' AA loans, which can be traded, but we will now start accumulating small untradeable parts of 'quarantined' loans which will remain in the various accounts we hold. Messy. A good job we are all 'sophisticated' investors, because there is no chance of explaining all this to those who are not. A major benefit of the Access accounts was their simplicity in normal market conditions, in that they looked like saving term-accounts. But we won't. AIUI the 90D AA will (potentially) have the most untradeable loans, followed by the 30D AA then the QAA.
Then if funds are transferred between the accounts (up or down the line), it could all get very complicated.
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dead-money
Rocket to the Moon
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Post by dead-money on Aug 25, 2020 11:05:52 GMT
Guess we will all have the same mix of the 'clean' AA loans, which can be traded, but we will now start accumulating small untradeable parts of 'quarantined' loans which will remain in the various accounts we hold. Messy. A good job we are all 'sophisticated' investors, because there is no chance of explaining all this to those who are not. A major benefit of the Access accounts was their simplicity in normal market conditions, in that they looked like saving term-accounts. But we won't. AIUI the 90D AA will (potentially) have the most untradeable loans, followed by the 30D AA then the QAA.
Then if funds are transferred between the accounts (up or down the line), it could all get very complicated.
Plus overtime further loans will become untradeable or non-ringfenced suspended loans may become tradeable again, so each lenders rump will diverge and be different.
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ceejay
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Post by ceejay on Aug 25, 2020 11:08:38 GMT
Guess we will all have the same mix of the 'clean' AA loans, which can be traded, but we will now start accumulating small untradeable parts of 'quarantined' loans which will remain in the various accounts we hold. Messy. A good job we are all 'sophisticated' investors, because there is no chance of explaining all this to those who are not. A major benefit of the Access accounts was their simplicity in normal market conditions, in that they looked like saving term-accounts. But we won't. AIUI the 90D AA will (potentially) have the most untradeable loans, followed by the 30D AA then the QAA.
Then if funds are transferred between the accounts (up or down the line), it could all get very complicated.
Interesting. Is that because the 90DAA has a proportionally smaller PF so will find it harder manage the ring fencing? If so, as you say, transfers will be interesting...
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treeman
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Post by treeman on Aug 25, 2020 11:09:01 GMT
How can this work when the 30D and 90D AAs have to be drawn through the QAA? That is, if my understanding is correct that the loans suspended on each account may differ according to the size of each of the PFs. Surely it can only work if there's just one PF across all AAs? They don't. It's only if a 30DAA/90DAA lender wishes to sell out at a discount that they have to transfer their holdings across to the QAA. There are certainly separate PFs for the 3 AA accounts, and the 90DAA PF is certainly the least well funded. What's yet unclear is whether a notice-expired 90DAA withdrawal can be transferred to the QAA in full (suspended loans and all, presumably along with its share of the 90DAA PF) or whether the suspended loans must remain in the 90DAA. It can. Well, it definitely could straight after the email anyways......
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SteveT
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Post by SteveT on Aug 25, 2020 11:11:45 GMT
They don't. It's only if a 30DAA/90DAA lender wishes to sell out at a discount that they have to transfer their holdings across to the QAA. There are certainly separate PFs for the 3 AA accounts, and the 90DAA PF is certainly the least well funded. What's yet unclear is whether a notice-expired 90DAA withdrawal can be transferred to the QAA in full (suspended loans and all, presumably along with its share of the 90DAA PF) or whether the suspended loans must remain in the 90DAA. It can. Well, it definitely could straight after the email anyways...... No AA loan has yet been suspended !
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IFISAcava
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Post by IFISAcava on Aug 25, 2020 11:16:33 GMT
But we won't. AIUI the 90D AA will (potentially) have the most untradeable loans, followed by the 30D AA then the QAA.
Then if funds are transferred between the accounts (up or down the line), it could all get very complicated.
Interesting. Is that because the 90DAA has a proportionally smaller PF so will find it harder manage the ring fencing? If so, as you say, transfers will be interesting... heads-up taken, and action pending... EDIT: although looking at the figures provided, the difference in PF/ringfenced funds didn't seem much between the accounts by my calculations. Am I missing something?
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Post by stuartassetzcapital on Aug 25, 2020 11:47:25 GMT
As per the other thread :
Without saying anything new and not already in the email but to respond to some of the comments made that don't align with that email...there is a probability that some non fully ringfenced loans exist shortly, and for a period. This is due to the live reassessment of forward looking loan risk in the COVID period and the fair loan pricing as required FCA regulations versus the very much today-only provision fund cash balance that we disclose due to the requirement to ignore all future contributions into the PF.
We know of no reason today why those PF contributions will not be made in the future but because they are not guaranteed to top up the PF in the future we ignore them 100% under the regulations. On the other hand we very much look for issues with loans and react to those to ensure a fairly priced trading on those loans. The relative difference in timing of when loan suspensions happen and when any further PF money was potentially received is also quite significant.
It is also worth noting another fairly obvious but important point. If for a period there are some loans that do not have their perceived risk covered by ringfenced cash in the PF then we would need to suspend the whole of those loans from trading whilst that happened, under the past terms of the PF and the AAs. That might be because just £100 of risk was not covered in cash by the PF on a loan and we would then actually suspend trading on a say £1m loan as a result. Any suspended loan values are not the same thing as the potential loss on those loans, quite an important point to make and indeed all our loans are secured.
There are also no suspended loans at present, this email is to explain it is likely to happen shortly and for a period and it also flags that if/when the PF grows further it could catch up with the non-ringfenced risk again. We are exploring more elegant potential solutions than suspensions as per the email.
It is interesting to see the market implied expectation on discounts as being around 10% temporarily today as that suggests people are expecting £22m of Access Account losses on top of both the existing provision fund cash and also on top of future PF contributions. Is that what people intended to imply I wonder? No advice provided of course but we remind you that the fair pricing of loans means that capital discounts (that create ringfencing requirements) are up to date on the loan book with facts we have received to date. Of course those facts can evolve over time but we still today have a £0 excess of loan risk versus the PF cash balance held today. We also have no data today regarding any expected change to Access Accounts target rates either, otherwise we would be suggesting changing them. Equally the current target rates are set at a level that is designed to permit those rates to be delivered, including any losses and hence including any provision fund contributions and they continue at a healthy monthly level.
Overall it is quite probable that ringfencing requirements get ahead of provision fund cash holdings at the bottom of economic cycles, particularly in this scale of cycle. But the key question is that over time, does that account continue to pay healthy interest and does any provision fund shortfall catch up again in the future by the time loan recoveries are in. We provide the loan data to judge that for yourselves and make your decisions but as a business we seek that outcome in the way target rates are set, loan risk assessed on new lending and how much provision fund funding is grown versus the target rates paid out. If we do deliver that then our plan has worked well, and vice versa. We obviously want that plan to work as a sustainable business.
I hope that helps.
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cb25
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Post by cb25 on Aug 25, 2020 11:50:32 GMT
As per the other thread : Without saying anything new and not already in the email but to respond to some of the comments made that don't align with that email...there is a probability that some non fully ringfenced loans exist shortly, and for a period. This is due to the live reassessment of forward looking loan risk in the COVID period and the fair loan pricing as required FCA regulations versus the very much today-only provision fund cash balance that we disclose due to the requirement to ignore all future contributions into the PF. We know of no reason today why those PF contributions will not be made in the future but because they are not guaranteed to top up the PF in the future we ignore them 100% under the regulations. On the other hand we very much look for issues with loans and react to those to ensure a fairly priced trading on those loans. The relative difference in timing of when loan suspensions happen and when any further PF money was potentially received is also quite significant. It is also worth noting another fairly obvious but important point. If for a period there are some loans that do not have their perceived risk covered by ringfenced cash in the PF then we would need to suspend the whole of those loans from trading whilst that happened, under the past terms of the PF and the AAs. That might be because just £100 of risk was not covered in cash by the PF on a loan and we would then actually suspend trading on a say £1m loan as a result. Any suspended loan values are not the same thing as the potential loss on those loans, quite an important point to make and indeed all our loans are secured. There are also no suspended loans at present, this email is to explain it is likely to happen shortly and for a period and it also flags that if/when the PF grows further it could catch up with the non-ringfenced risk again. We are exploring more elegant potential solutions than suspensions as per the email. It is interesting to see the market implied expectation on discounts as being around 10% temporarily today as that suggests people are expecting £22m of Access Account losses on top of both the existing provision fund cash and also on top of future PF contributions. Is that what people intended to imply I wonder? No advice provided of course but we remind you that the fair pricing of loans means that capital discounts (that create ringfencing requirements) are up to date on the loan book with facts we have received to date. Of course those facts can evolve over time but we still today have a £0 excess of loan risk versus the PF cash balance held today. We also have no data today regarding any expected change to Access Accounts target rates either, otherwise we would be suggesting changing them. Overall it is quite probable that ringfencing requirements get ahead of provision fund cash holdings at the bottom of economic cycles, particularly in this scale of cycle. But the key question is that over time, does that account continue to pay healthy interest and does any provision fund shortfall catch up again in the future by the time loan recoveries are in. We provide the loan data to judge that for yourselves and make your decisions but as a business we seek that outcome in the way target rates are set, loan risk assessed on new lending and how much provision fund funding is grown versus the target rates paid out. If we do deliver that then our plan has worked well, and vice versa. We obviously want that plan to work as a sustainable business. I hope that helps. Stuart,
Thanks for the above. Do you have a response to the point made by iRobot (full post is a little earlier in this thread)?
"1) An Access Account Market Place (AAMP) was mooted for weeks / months and delivered on Wednesday, 12th of August.
2) Nine days later, on the 21st of August, an email is sent titled: "Reinvesting your interest via the Access Accounts", explaining the impact of the AAMP and how to utilise it to re-invest interest, should the lender choose to.
3) Today, not even a fortnight after the launch of the AAMP, AC send an email outlining "Important Information" around the Provision Fund's future performance.
It seems to me that 3) was predictable - by those who have the responsibility and information available to make these important forecasts - and could and should have been communicated before events 1) & 2)."
---
Edit: iRobot apologies for using your post, but I thought it made an excellent point
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Post by stuartassetzcapital on Aug 25, 2020 11:55:12 GMT
As per the other thread : Without saying anything new and not already in the email but to respond to some of the comments made that don't align with that email...there is a probability that some non fully ringfenced loans exist shortly, and for a period. This is due to the live reassessment of forward looking loan risk in the COVID period and the fair loan pricing as required FCA regulations versus the very much today-only provision fund cash balance that we disclose due to the requirement to ignore all future contributions into the PF. We know of no reason today why those PF contributions will not be made in the future but because they are not guaranteed to top up the PF in the future we ignore them 100% under the regulations. On the other hand we very much look for issues with loans and react to those to ensure a fairly priced trading on those loans. The relative difference in timing of when loan suspensions happen and when any further PF money was potentially received is also quite significant. It is also worth noting another fairly obvious but important point. If for a period there are some loans that do not have their perceived risk covered by ringfenced cash in the PF then we would need to suspend the whole of those loans from trading whilst that happened, under the past terms of the PF and the AAs. That might be because just £100 of risk was not covered in cash by the PF on a loan and we would then actually suspend trading on a say £1m loan as a result. Any suspended loan values are not the same thing as the potential loss on those loans, quite an important point to make and indeed all our loans are secured. There are also no suspended loans at present, this email is to explain it is likely to happen shortly and for a period and it also flags that if/when the PF grows further it could catch up with the non-ringfenced risk again. We are exploring more elegant potential solutions than suspensions as per the email. It is interesting to see the market implied expectation on discounts as being around 10% temporarily today as that suggests people are expecting £22m of Access Account losses on top of both the existing provision fund cash and also on top of future PF contributions. Is that what people intended to imply I wonder? No advice provided of course but we remind you that the fair pricing of loans means that capital discounts (that create ringfencing requirements) are up to date on the loan book with facts we have received to date. Of course those facts can evolve over time but we still today have a £0 excess of loan risk versus the PF cash balance held today. We also have no data today regarding any expected change to Access Accounts target rates either, otherwise we would be suggesting changing them. Overall it is quite probable that ringfencing requirements get ahead of provision fund cash holdings at the bottom of economic cycles, particularly in this scale of cycle. But the key question is that over time, does that account continue to pay healthy interest and does any provision fund shortfall catch up again in the future by the time loan recoveries are in. We provide the loan data to judge that for yourselves and make your decisions but as a business we seek that outcome in the way target rates are set, loan risk assessed on new lending and how much provision fund funding is grown versus the target rates paid out. If we do deliver that then our plan has worked well, and vice versa. We obviously want that plan to work as a sustainable business. I hope that helps. Stuart,
Thanks for the above. Do you have a response to the point made by iRobot (full post is a little earlier in this thread)?
"1) An Access Account Market Place (AAMP) was mooted for weeks / months and delivered on Wednesday, 12th of August.
2) Nine days later, on the 21st of August, an email is sent titled: "Reinvesting your interest via the Access Accounts", explaining the impact of the AAMP and how to utilise it to re-invest interest, should the lender choose to.
3) Today, not even a fortnight after the launch of the AAMP, AC send an email outlining "Important Information" around the Provision Fund's future performance.
It seems to me that 3) was predictable - by those who have the responsibility and information available to make these important forecasts - and could and should have been communicated before events 1) & 2)."
Yes that's why the terms refer to the possibility because it could happen and also why we publish the provision fund balances per account to show headroom/otherwise at any time. There is still 100% ringfencing protection today and this email points out that the other data we have published has been a precursor to this happening, at least for a while but we are not announcing that the ringencing doesn't cover some loans today, or again later, which is how some have interpreted it.
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