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Post by gramsky on Dec 1, 2020 12:20:11 GMT
I would imagine, like myself, owing to the higher risk of loans caused by COVID that many investors have sold loans and are now sitting with large amounts of cash sitting in P2P Lending accounts uninvested, maybe waiting for the situation to improve before deciding to reinvest or not knowing where else to put the money with such low interest rates elsewhere.
From what I have investigated so far this money is pooled and deposited by each P2P Lending company in customer cash accounts with various banks, (AC uses Barclays for instance).
This I believe puts investors cash at risk should a bank or banks go bust since under the 'bail-in' rules the banks can take this money, as happened a few years ago in Cyprus and I believe in Argentina.
This would leave only £85,000 remaining, either left by the bank or compensated by the FSCS, to be shared between investors. So, for example, if say 1000 investors have a total of £10m in a pool deposited in a bank that goes bust there would be a total loss of £9.915m or an average loss of 99.15% to each investor’s cash.
The AC chat team were unable to answer my query or confirm my fears regarding this today, but I intend making further investigations.
Are there any banking or financial experts out there able to confirm my fears or explain how my theory is incorrect?
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tomp
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Post by tomp on Dec 1, 2020 15:44:04 GMT
I would imagine, like myself, owing to the higher risk of loans caused by COVID that many investors have sold loans and are now sitting with large amounts of cash sitting in P2P Lending accounts uninvested, maybe waiting for the situation to improve before deciding to reinvest or not knowing where else to put the money with such low interest rates elsewhere. From what I have investigated so far this money is pooled and deposited by each P2P Lending company in customer cash accounts with various banks, (AC uses Barclays for instance). This I believe puts investors cash at risk should a bank or banks go bust since under the 'bail-in' rules the banks can take this money, as happened a few years ago in Cyprus and I believe in Argentina. This would leave only £85,000 remaining, either left by the bank or compensated by the FSCS, to be shared between investors. So, for example, if say 1000 investors have a total of £10m in a pool deposited in a bank that goes bust there would be a total loss of £9.915m or an average loss of 99.15% to each investor’s cash. The AC chat team were unable to answer my query or confirm my fears regarding this today, but I intend making further investigations. Are there any banking or financial experts out there able to confirm my fears or explain how my theory is incorrect? I am not an expert. From my understanding FSCS was not designed to withstand multiple bank failures and under the 'bail-in' rules failing bank can take your money and issue you with bank stocks. I don't think your £85k is secure in that extreme case.
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corto
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Post by corto on Dec 1, 2020 15:55:52 GMT
I would imagine, like myself, owing to the higher risk of loans caused by COVID that many investors have sold loans and are now sitting with large a... If you fear for your money get it out and go elsewhere; there will be loads of changes in the future. I don't know the answer to your question, but curious.
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Greenwood2
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Post by Greenwood2 on Dec 1, 2020 16:11:41 GMT
Not my layman’s understanding. My understanding is that each customer with cash in the client account is covered up to £85k by the FSCS should the bank holding a financial services client account fail. The exception might be if a customer also has a personal account with the same bank in which case the £85k is the maximum cover across the share of pooled cash and the cash held personally. “ I’m an individual account holder. Am I protected?
Yes. FSCS protects up to £85,000 in total across all accounts you hold, either in your name or where you are listed as the beneficial owner (e.g., money held on your behalf in a client account) within the bank/banking group.” www.fscs.org.uk/industry-resources/deposit-protection-banks/DYORI suppose it then depends on how well the client account is being run, it seems for some of the failed platforms it wasn't quite what it seemed or should have been. I wouldn't leave any significant amount of money sitting there, just in case.
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rocky1
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Post by rocky1 on Dec 1, 2020 16:48:47 GMT
i think i would rather trust the banks at the moment over any p2p platform.more chance of platform failure at the shortest of notice and we all know what happens then.
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Greenwood2
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Post by Greenwood2 on Dec 1, 2020 20:27:04 GMT
I suppose it then depends on how well the client account is being run, it seems for some of the failed platforms it wasn't quite what it seemed or should have been. I wouldn't leave any significant amount of money sitting there, just in case. If the assessment is that the P2P platform can’t be trusted to follow client account money rules AND is also likely to fail then of course one shouldn’t go anywhere near the platform and if you have the misfortune of being on the platform one should remove anything and everything that is liquid or can be liquidated. In such a scenario I don’t think worrying that Barclays might fail is centre radar-screen. In a more mainstream part of financial services I personally wouldn’t, for example, worry about uninvested cash in an AJ Bell Sipp. I think some failed P2P platforms have been untrustworthy in terms of client accounts, whether all remaining platforms are trustworthy we don't know, or if they are likely to fail, so I would not leave funds in the client account (why leave it there anyway?). Most other financial institutions I would probably trust, but again I would not leave uninvested funds for any length of time, unless they paid good interest.
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Post by danraj on Dec 20, 2020 12:30:55 GMT
The terms of a bail-in would probably exclude segregated client accounts.
Under CASS rules, P2P firms must review the suitability of the client account provided at least once per year.
At rebuildingsociety.com we've integrated with open banking to make credits and debits to our client account very efficient via the website or mobile app.
Lenders can also enable a "repay & relay" feature whereby any available balance is relayed to the clients bank account within 1 business day.
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daveb
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Post by daveb on Jan 16, 2021 13:56:14 GMT
Better to have the money in a bank earning 0.6% than uninvested in P2p earning nowt
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p2pfan
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Post by p2pfan on Jan 16, 2021 23:31:55 GMT
I would imagine, like myself, owing to the higher risk of loans caused by COVID that many investors have sold loans and are now sitting with large amounts of cash sitting in P2P Lending accounts uninvested, maybe waiting for the situation to improve before deciding to reinvest or not knowing where else to put the money with such low interest rates elsewhere. I wouldn't trust any P2P platform to "save" a large amount of my money with them, uninvested. It's one thing to have money invested via them where you can earn a potentially significant rate of return. But to keep money deposited with a P2P platform is a double negative in that you are risking losing those funds should the P2P platform close down and you are getting a return of 0%. At least with a bank account you can get 0.5%+, even though admittedly bank savings account returns are ridiculously miserly nowadays. I would always keep excess funds saved with an FSCS-protected UK bank account.
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Post by Harland Kearney on Jan 17, 2021 3:23:50 GMT
Keeping cash in a peer to peer company.... anybody know whats wrong with this statement? Even with ring fenced accounts, if a peer to peer company goes belly up, nothing says the directors or administrators will keep their word to have not dipped into that (as has happened already accross the board). Either earn the interest to match the risk, or cash it out. Thats what I say & do.
The OP brings up good points and is basically why you shouldn't hold cash in P2P other than to deposit for investment and withdraw for earnings. I know people in Lendy/COL who have had or still have cash tied up for now years, cash which was sitting from proceeds of sold loans.
I imagine this is a question only being asked by those with cash in a ISA wrapped account, that can't be transfered out or is in some type of lock in/pondering.
I actually did cash out a fair bit of cash out of the P2P, that money was partly redirected into a number of 1.5-2% cash saving accounts (peanuts, but there we go) whilst it is being drip fed into a number of equitiy related securities & short term credit funds ect. I find these better match risk and return.
The only money I've added to Peer to Peer for the whole of 2020, was into Loanpad.
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shw
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Post by shw on Jan 17, 2021 20:45:45 GMT
Hi
does anyone have experience of challenging a P2P platform that has gone into administration for
possible criminal negligence or similar in the information given on loans to get more cash invested
from lenders over the duration of the loan ?
or experience of forming a lenders group on a specific loan to communicate with the administrators
in order to clarify where our cash has gone,the process of checking on the borrower to see where
cash has been spent and results achieved then the all important risk analysis on the loans future
and how much of our cash we might get back ?
some of you out there must have a legal background,or were you too smart to invest in P2P !!
although some might say we were “greedy” to chase high interest loans,for those of us who
believed professional property valuations (and liability insurance backstop) and now find we might
be lucky to get half or less,after fees,back is ———g criminal - no doubt the FCA will say tough dodo
we are on our own ?
thanks for reading my vent - I think I feel better for it for now (or until I have a look at my accounts)
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ilmoro
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Post by ilmoro on Jan 17, 2021 21:40:05 GMT
Hi does anyone have experience of challenging a P2P platform that has gone into administration for possible criminal negligence or similar in the information given on loans to get more cash invested from lenders over the duration of the loan ? or experience of forming a lenders group on a specific loan to communicate with the administrators in order to clarify where our cash has gone,the process of checking on the borrower to see where cash has been spent and results achieved then the all important risk analysis on the loans future and how much of our cash we might get back ? some of you out there must have a legal background,or were you too smart to invest in P2P !! although some might say we were “greedy” to chase high interest loans,for those of us who believed professional property valuations (and liability insurance backstop) and now find we might be lucky to get half or less,after fees,back is ———g criminal - no doubt the FCA will say tough dodo we are on our own ? thanks for reading my vent - I think I feel better for it for now (or until I have a look at my accounts) Which platform? With the exception of MT (too recent and exact situation pending) there are action groups for the platforms in administration (Lendy, FS, Wellesley) There are already court cases underway in regards to certain aspects of the administration for FS & Lendy relative to lender recoveries. There is a huge amount of discussion on specific loans, outcomes, borrower conduct & platform actions. If you could be more specific perhaps we can direct you better.
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shw
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Post by shw on Jan 19, 2021 16:23:12 GMT
thanks for reply (yes it is MT),it is good to know,maybe,that other failed platform lenders have established
current cases which hopefully means there is an established and proven method for groups of investors to
voice their common complaints possibly with strengthened leverage versus a single lender voice.
I must learn to be more patient with lack of communication about where our cash has gone and learn to live like
a mushroom (at least they are fed something) !!
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Greenwood2
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Post by Greenwood2 on Jan 19, 2021 20:14:13 GMT
thanks for reply (yes it is MT),it is good to know,maybe,that other failed platform lenders have established current cases which hopefully means there is an established and proven method for groups of investors to voice their common complaints possibly with strengthened leverage versus a single lender voice. I must learn to be more patient with lack of communication about where our cash has gone and learn to live like a mushroom (at least they are fed something) !! There is really no progress though. the wheels turn extremely slow, we hope they are turning, just a bit jaundiced.
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