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Improving the accuracy of the Provision Fund coverage ratio

By RateSetter Notices | Wed 2 Sep 15

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We aim to be as open as possible about how our market works and any relevant changes, subject to protecting commercial sensitivities.

We pioneered the introduction of the Provision Fund which has ensured that no individual RateSetter investor has ever lost a penny – a unique track record of which we are very proud. The Provision Fund has grown significantly over time and now stands at £15.5m.

The coverage ratio is a real time measure of the size of the Provision Fund relative to an estimate of the future claims that could be made against it. Today we have made a minor adjustment to the way estimated expected losses are calculated, to make it more accurate. Improving data and experience of RateSetter-specific customer behaviour in repaying loans means we periodically review our forecast of future claims and therefore the coverage ratio. The result is that we can be more accurate in our projections for the claims likely to be made on the Provision Fund, which has led to an increase in the coverage ratio - however, we always maintain a degree of prudence so that we never knowingly underestimate the claims that could be made.

For more information on the Provision Fund click here.

 
”When calculating the coverage ratio, we always maintain a degree of prudence so that we never knowingly underestimate the claims that could be made“

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