annie
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Post by annie on Jul 18, 2017 18:38:39 GMT
but how long can RS rely on the Rolling market to fund long term loans with news like this. That was Northern Rock's problem, short-term money to fund 25 year mortgages. And when they first hit the news some saw an opportunity because "they couldn't be allowed to fail" Good while it lasted but as I've said on other threads, I think P2P has had it's day and the race for ISA funds can only push rates lower without the bank deposit guarantee. I for one will be sleeping on it but expect to send my email to get out.
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Post by gadget on Jul 18, 2017 19:17:39 GMT
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jlend
Member of DD Central
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Post by jlend on Jul 18, 2017 19:39:56 GMT
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r00lish67
Member of DD Central
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Post by r00lish67 on Jul 18, 2017 21:02:05 GMT
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teddy
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Post by teddy on Jul 18, 2017 21:06:24 GMT
Shocking, but not surprised. I'm just glad I got out at the start of the year when I started to smell a dead rat.
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ozboy
Member of DD Central
Mine's a Large One! (Snigger, snigger .......)
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Post by ozboy on Jul 18, 2017 21:15:05 GMT
And a dead horse, and a dead skunk, and a dead ...........................................
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am
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Post by am on Jul 18, 2017 21:55:40 GMT
Assuming I am reading this correctly: "....As lending this amount to a single business was outside RateSetter’s credit policy and was an exceptional case," looks rather worrying. Governance anyone ? Or am I misinterpreting ? If I understand correctly the directors' would set the credit policy, subject the constraints imposed by the FCA and any covenants agreed with creditors and investors, and the director's could grant exceptions, subject to the same constraints. However, it wasn't RS that lent so much money to a single end-borrower, but a wholesale lender. Did RS impose a covenant on the wholesale lender to the effect that there was a limit on loans to any particular borrower? Companies House have an administrators' report on the wholesale lender detailing the transaction by which RS obtained ownership of the trading companies. I need at least a second read before I draw any conclusions. I haven't worked out to my satisfaction what happened with the advertising company, but it seems to me that there should also have been a covenant on the wholesale lender to the effect that the money lent should only be used for the purposes of vehicle financing. (The documents at Companies House show RS as the current sole shareholder.)
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am
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Post by am on Jul 18, 2017 21:58:20 GMT
I opened 2 accounts last year, with the promise of £100 bonus if I kept my money in a year..well one is about 10 days off that, the other about 50...in a dilemma about what best to do..the cynic in me thinks the email is trying to encourage investors to sell out as they have over committed with the £100 offer ??..Thoughts ? If I understand correctly you have 30 days to exercise the fee-free sellout, so you can still get the bonus on the first of those accounts, provided there is someone willing to take on your loan parts.
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Post by WestonKevTMP on Jul 18, 2017 22:07:52 GMT
To lose money on one large investor may be regarded as a misfortune; to lose money on three in a short space of time looks like carelessness. It's been picked up by the Guardian: www.theguardian.com/business/2017/jul/18/peer-to-peer-lender-ratesetter-hit-by-struggling-loansThe issue was/is in the ' Wholesale Lending' team, which typically lent to other lending companies. The lending through GeorgeBanco and the vehicle businesses was not that different than if the loans had been originated internally, they were just reliant on a third party specialist underwriting. Generally despite the large values quoted, with the exception of AdPods, the wholesale loans are actually segmented into lots of smaller loans, so it isn't really one massive loan. In my view (although it wasn't my area, I had responsibility for 'Retail Lending' credit policy), these were good safe deals. But the FCA didn't like this wholesale lending, hence the winding down. These loans will wind down and probably leave a surplus in the Provision Fund from their contributions. The issue was lending to AdPods, which was in effect doing one huge loan to a single entity. As The Guardian article says " It also loaned a further £12m to an advertising company called Adpod..... The website admits that the loans, of which £8.5m are still outstanding, should not have cleared its own credit policy. It has now fully acquired Adpod to make sure that the loans will be repaid to the website’s users in full". This Wholesale Lending deal was different as it was lending to a single entity and hence outside concentration risk credit policy, and this was RateSetter's mistake. But at the end of the day, RateSetter have identified quickly the company was in trouble and taken action. They've communicated to lenders (albeit with a FCA push), and no retail lender has lost any money. The Provision Fund hasn't been touched, the purchase of Adpod has been paid for effectively by the institutional lenders at the lost of equity by the original shareholders who have been diluted. The people that made the lending decision have lost out, not lenders. In the long run the institutional investors are betting this is a short term blip, a mistake by Wholesale Lending management was made, and this will have represented an opportunity to increase their equity share. All employees involved in the original deal still work for RateSetter, so they'll have the opportunity to put it right. Who knows, perhaps one day RateSetter will pivot into a successful Adpod advertising Goliath to rival JCDecaux. For my part, providing their isn't a " bank run", with the risk increased due to the RateSetter offer to allow lenders to get out, I think the only impact will be to the ego reputation of management. Perhaps we'll even get to lend above 5% AER again, because I for one continue to be a lender. I'm still long on RateSetter.... for the record I've continued to add funds as a savings vehicle despite leaving last October '16. Kevin.
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am
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Post by am on Jul 18, 2017 22:10:42 GMT
To lose money on one large investor may be regarded as a misfortune; to lose money on three in a short space of time looks like carelessness. This should be a warning to all investors who think that RS are so low risk that accepting 2%ish is worth it, also those in the rolling market who believe that can get out quick should be thinking of the increase chances of a lock in given RS have proved that are not that careful with large amounts of their money and will lose investors confidence. If these companies failed why do RS think that they can do better by taking on the business themselves? RS and their PF are already a complex beasts and this will do nothing to help transparency. The lack of FCA approval is also worrying. I believe more sophisticated investors have been either running down their RS investments or leaving altogether, I cannot see this type of investor committing more funds to RS given the risks and rates. Rates should now rise but how long can RS rely on the Rolling market to fund long term loans with news like this. I don't believe that any money was lost on the 3rd entity. The other two entries related to loans to a single wholesale lender. I don't know offhand whether the two vehicle finance companies RS have acquired were loss making. The adminstrators' report refers to problems at a 3rd operating company.
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Post by p2plender on Jul 19, 2017 0:27:31 GMT
Much appreciated comments as ever WK, I'm staying around too.
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Post by jackpease on Jul 19, 2017 6:32:02 GMT
It seems making a mistake, fessing up and letting us exit fee-free attracts as much criticism as FC-style making a mistake, not fessing up and not letting us exit fee free. I suspect similar problems will emerge at most of the apparently safer alternatives Jack P
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puddleduck
Member of DD Central
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Post by puddleduck on Jul 19, 2017 6:52:28 GMT
It seems making a mistake, fessing up and letting us exit fee-free attracts as much criticism as FC-style making a mistake, not fessing up and not letting us exit fee free. I suspect similar problems will emerge at most of the apparently safer alternatives Jack P I think the criticism is justified. On the face of it, this looks like extremely reckless lending, that would have all but wiped out the provision fund if they had been allowed to come home to roost. Transparency is good and no one is I think criticizing that - but remember Ratesetter are lending using OUR money and they need to manage the risks, as we have no input into the lender-borrower relationship unlike other platforms, so they need IMHO to take a much less risk adverse path to safeguard our money. I planned to exit anyway mainly because the rates are just too poor, it shows really how small the PF is in reality that it would have barely withstood those defaults.
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rhmc
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Post by rhmc on Jul 19, 2017 6:54:49 GMT
Hi all. New here but not to Ratesetter, cherry picking contracts as and when I can. Anyway, I'm just trying to dechipher our ongoing exposure to these firms. Do people agree/disagree with the following summary: - The PF/We are exposed to potential defaults on £36m: (£24m for VCL, and £12m for VSL). Ratesetter is our new counterparty and has a £31m security charge on these loans
- Ratesetter is guarantor to Adpod's repayments to us, so it is exposed to potential defaults on £8.5m outstanding payments
- The PF/we are exposed to potential defaults on £32m of George Banco loans. As far as I can tell this shouldn't be > 2.9% (i.e. the standard expected loss) - it's just being brought up as part of coming clean/change in strategy.
If that sounds about right, then surely the information that's missing, is whether Ratesetter itself as counterparty/guarantor is good for £13.5m of potential losses (i.e. £36m - £31m = £5m on VCL & VSL, and £8.5m on Adpod). In other words, a credit check on Ratesetter itself.I don't think this information is readily available, but I think it's right that we should have it, as we rely on Ratesetter performing similar credit checks on borrowers through our regular lending contracts. Anyone seen anything? Or is this something we should formally request from Ratesetter? Thanks, Tom
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dorset
Member of DD Central
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Post by dorset on Jul 19, 2017 8:08:38 GMT
To lose money on one large investor may be regarded as a misfortune; to lose money on three in a short space of time looks like carelessness. This should be a warning to all investors who think that RS are so low risk that accepting 2%ish is worth it, also those in the rolling market who believe that can get out quick should be thinking of the increase chances of a lock in given RS have proved that are not that careful with large amounts of their money and will lose investors confidence. If these companies failed why do RS think that they can do better by taking on the business themselves? RS and their PF are already a complex beasts and this will do nothing to help transparency. The lack of FCA approval is also worrying. I believe more sophisticated investors have been either running down their RS investments or leaving altogether, I cannot see this type of investor committing more funds to RS given the risks and rates. Rates should now rise but how long can RS rely on the Rolling market to fund long term loans with news like this. I don't believe that any money was lost on the 3rd entity. The other two entries related to loans to a single wholesale lender. I don't know offhand whether the two vehicle finance companies RS have acquired were loss making. The adminstrators' report refers to problems at a 3rd operating company.
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