If you could change one thing at AC, what would it be?

No, current accrued interest, average rate, total investment, total lent.

I get this error message before i get to the security question.

Has happened twice already this morning...

Yes, but the point @john334 seemed to be making was that at RateSetter, any surplus that accumulates in the Provision Fund is eventually distributed to lenders, but AC's surplus seems to go into their own back pockets.

This gives AC an incentive to take more risks with their provision fund, as AC directly benefit from the upside (if defaults are lower than expected), but do not suffer from the downside losses if defaults are higher than expected (as it is then lenders who get a return below the capped rate, or in an extreme case, possibly an actual loss).

Alternatively, it could be spun positively - AC have a greater incentive to ensure collections perform well, as their interests are aligned with those of non-protected lenders.

The conflict would be between actions to minimise the chance that the PF will ever be insolvent, and actions that increase the uncertainty of funding of the PF, giving a higher chance that the PF will be able to declare a surplus, but also a higher chance that the PF will become insolvent.

For example, if all provision funds for all products are pooled, the chance that the PF will ever be insolved is minimised.

However, if a platform structures it as separate independent provision funds, this increases the chance that they'll be able to declare a surplus on at least one of them is increase (especially when one becomes closed to new investment), but also the chance that one of the funds will become insolvent is also increased.

Similarly, a platform deciding whether to approve an unusually large loan which could single-handedly wipe out the whole balance of the provision fund (but which will make a very large contribution to the provision fund) may have different priorities if it gets to keep the profits but doesn't suffer a direct loss.


There seems something of a conflict when the largest loan that may be (attempted to be) protected by the PF is 20% of funds, but the PF only has cover for 5% - I don't think RateSetter, for example, has approved any single loan that could single-handedly wipe out the provision fund, yet AC boasts of having the largest ever recovery of a P2P loan - an amount far larger than the balance of their PF, and which could thus NOT have been covered by it had the default occurred under PF conditions.

sl75 is as usual far more articulate than I but my only addition is that as I understand it, RSs fund continues to grow and hasn't got a hard x% cap on like GBBA does.

On top of the PF we still have the asset security, where RS only have the PF, so chances of total losses should be reduced.  The financial types in the business have done plenty of modelling and believe the 5% level is right.

Also whilst the diversification algorithm has an upper limit of 20%, it strives for a balanced book with all loans around the same level.  New loans can only be over exposed if there's a glut of loans in which to invest in and a build up of demand.  This is very unlikely in the GBBA as it covers somewhere around 50% of all loans coming on to the platform at the moment, so new loans are likely to be bought into at the rate funds are deposited whilst the diversification algorithm then balances that across the loan book.

It's not in our interests for the PF to run out of money as the reputational damage keeps that in check, and I still think we're better off aiming to run a surplus across the board than crashing one or more of the PFs.  Not quite following the logic there.