james
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Post by james on Sept 21, 2015 13:34:48 GMT
And interesting point about cash with our Barclays Client Account - in a total banking failure yes some of that or all might be lost but in theory is protected by FSCS to the relevant current limit unless a client banks elsewhere with Barclays in which case the limit applies to total deposits in all accounts with them. Is that a protected deposit account with £85,000 FSCS limit or a protected client money account with £50,000 FSCS limit? Or something else?
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Post by Deleted on Sept 21, 2015 14:08:39 GMT
Just a thought. Since the loans in this account are the ones "we" have not bought up until some 3 weeks ago, they were those loans that we have all looked at and rejected. Some of these loans have been looked at for a considerable time and have not been re-invested in. Hence, if we are good judges of risk these are the risky loans. On the other hand, if we are bad judges of risk these are great loans... Just saying  Just another point the £85k limit became £75k just recently as it is really based on Euro 100k. If the Euro drops further it will take our £75k down with it. |
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james
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Post by james on Sept 21, 2015 14:10:43 GMT
Banks have c 3-5% equity / first loss position and after that it is the taxpayer who did (but may not again) bail them out. I guess you are not up to date, should a globally important financial institution fail it is written into law there will be a bail in. What this means is the unsecured creditors (i.e. the bank account holders) would all lose money instead of the government. This was signed of and agreed with the USA and EU and is now law. That is not what the current UK resolution regime that applies from 1 January 2015 really says. It is also not what the EU Recovery and Resolution Directive really says ( a, b). No bail-in is required and if one is used, amounts up to the EU/FSCS limit are not subject to bail-in or are made whole by the FSCS. The general measures in likely preference order are: 1. private sector purchaser, a normal sale of assets to another bank 2. bridge bank, transfer of normal banking assets to a temporary operating bank leaving the troublesome debt with the original parent company but no losses for normal depositors. (I've included the asset separation and administration procedure aspects here) 3. bail-in of up to 8% of the balance sheet of the bank. Equity holders take losses first, then various subordinated corporate bond or other capital holders. Only if all of that is exhausted are deposits above the FSCS limit held by consumers or medium sized and smaller businesses vulnerable to bail-in. Basel III minimum tier 1 capital is 6%. Santander has the lowest of any comparable European bank, at 9.8%. So any bail-in of depositors is currently unlikely for British banks. 4. after a bail-in of the required amount government aid can be used, subject to state aid rules There's a fair bit more interesting detail and I recommend a read or scan of the BoE document for anyone who wants to know more about the possible approaches and rules.
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Sept 21, 2015 14:32:30 GMT
Just another point the £85k limit became £75k just recently as it is really based on Euro 100k. If the Euro drops further it will take our £75k down with it. From Jan 16. Review every 5 yrs.
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james
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Post by james on Sept 21, 2015 15:14:57 GMT
Since the loans in this account are the ones "we" have not bought up until some 3 weeks ago, they were those loans that we have all looked at and rejected. ... Hence, if we are good judges of risk these are the risky loans. ... On the other hand, if we are bad judges of risk these are great loans... Would you be implying that Assetz have chosen to bail-in all investors to possible, if unlikely, losses on loans that they have rejected?  Either directly by participating in the loan or indirectly via reduced risk protection if the fund is used?
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Post by chris on Sept 21, 2015 15:39:55 GMT
Since the loans in this account are the ones "we" have not bought up until some 3 weeks ago, they were those loans that we have all looked at and rejected. ... Hence, if we are good judges of risk these are the risky loans. ... On the other hand, if we are bad judges of risk these are great loans... Would you be implying that Assetz have chosen to bail-in all investors to possible, if unlikely, losses on loans that they have rejected? Either directly by participating in the loan or indirectly via reduced risk protection if the fund is used? Quite a presumption but incorrect. That's not the investment strategy.
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james
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Post by james on Sept 21, 2015 15:53:12 GMT
That's probably a good thing. Is there any grain of truth in the apparent suggestion that the money ended up going into those not taken up loans> Maybe just because those were the ones that were available? It'd be an interesting side-effect of an even allocation approach if it did work that way but I'm not sure that it would be a particularly accurate longer term reality.
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Post by chris on Sept 21, 2015 16:55:14 GMT
That's probably a good thing. Is there any grain of truth in the apparent suggestion that the money ended up going into those not taken up loans> Maybe just because those were the ones that were available? It'd be an interesting side-effect of an even allocation approach if it did work that way but I'm not sure that it would be a particularly accurate longer term reality. I believe it's bought up a chunk in one loan that was slowly selling down, but that's mostly as we need to deploy the cash in order to generate a return to pay the interest (there are some regulatory hurdles here). That holding will be slowly sold down as other opportunities come up. The strategy going forward will partly revolve around investing in new loans as they draw down and then selling down as demand dictates, helping smooth availability for the GBBA / GEIA / MLIA, but also freeing underwriter cash more quickly to allow us to recycle that into fresh loans. That's probably revealing too much so I'll stop there but we'll be using the QAA to improve the platform for all in ways such as this instead of buying up chunks of loans no one appears to want and pocketing vast sums of cash as some seem to think.
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Post by Deleted on Sept 21, 2015 20:39:58 GMT
Since the loans in this account are the ones "we" have not bought up until some 3 weeks ago, they were those loans that we have all looked at and rejected. ... Hence, if we are good judges of risk these are the risky loans. ... On the other hand, if we are bad judges of risk these are great loans... Would you be implying that Assetz have chosen to bail-in all investors to possible, if unlikely, losses on loans that they have rejected? Either directly by participating in the loan or indirectly via reduced risk protection if the fund is used? Nothing implied, all just questions. I've just been thinking through the logic of the process from the perception point of being away for 2 weeks. Not sure where the logic goes as time moves forward, but Chris gives us a slight view of what might be happening in the future. What I would say is that with the new account taking precedence over other individual's accounts it changes the dynamics in an interesting way. Let's take it to another possible future, if the new account opens up to the total value of business then how would AC set the interest rate? Would it be a function of average total rates and the percentage of invested to cash? It would still be very liquid but it would take away the chance to second guess some of AC less perceptive risk/loans. If this was FC I can see that they might have built up sufficient data to start to drive their risk analysis automatically, but AC is still too small, I'd think.. , the trouble is that AC cannot let the competition get too far ahead.
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Either directly by participating in the loan or indirectly via reduced risk protection if the fund is used?
