Lending Works reduces Shield cash balance after platform overhaul
Lending Works’ new investment strategy has reduced the amount of cash its contingency fund needs to hold.
The peer-to-peer lender altered its terms last year to allow it to reduce interest rates when necessary and its head of risk has revealed the platform’s cash balance to cover defaults or missed payments through its Shield contingency fund has since decreased from £412,131 to £75,095.
“Due to the variable nature of the retail investor interest rates, we manage the cash balance to ensure it always has an adequate balance to fulfil its function, which it continues to do in line with the Lending Works Shield policy,” Ines Maia, head of risk at Lending Works, said.
“Our credit risk models are continuously monitored and improved to ensure that the Shield future income covers the expected future losses of the portfolio.
“As a result, the Shield cash balance should no longer be a key risk metric when analysing the performance of your investment.”
The Shield cash balance is the actual amount of cash currently held by Lending Works Trustee Limited to cover missed payments and defaults as they arise.
It is topped up each day as loan repayments are made by borrowers.
The platform is anticipating future income of £5.4m to come into the contingency fund, while £90.7m of loans are currently covered.
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Maia added that the platform’s loan performance was stable and investor rates remained at the same level, currently at 5.4 per cent for its growth product and four per cent for flexible.
This compares with rates of 5.2 per cent for growth and 4.2 per cent for its flexible product that were on offer between 2014 and 2019.