Assetz Capital has altered the way its access accounts work, including the introduction of a withdrawal fee that will only be charged during “non-normal market conditions.”
The aim is to avoid a lack of liquidity in the accounts and reduce the likelihood of withdrawal requests being queued, which happened at the start of the coronavirus outbreak last year.
The peer-to-peer business lender said its access accounts would also operate differently depending on market conditions, with an automatic operating level that will determine how much money is invested as well as how funds can be withdrawn.
The automatic operating level – based on how much cash there is in investor accounts to fund new loans – will be set later this month, Assetz Capital said.
This will be based on three levels based on how much cash is available to support new lending.
Minimum operating level
There will be a minimum operating level, which is the minimum amount of cash needed to cover future loan commitments.
In this scenario, Assetz Capital would stop making new loans and would retain loan repayments to rebuild liquidity.
Withdrawal requests would be funded by new investments and would still be allowed at full value or discounted if there was no queue.
But if increased demand leads to a withdrawal queue, priority will be given by discount on a first-in-first-out basis.
Funding commitments met
The next category is a funding commitments met level, which means there is enough money available to back new loans.
Under this scenario, when cash balances in the access accounts are low investors can withdraw at full value but not at a discount if there is no queue.
If there is a queue, withdrawal requests will be funded by loan repayments.
Withdrawals will also be fulfilled by taking 25 per cent of principal repayments to investors who do not wish to withdraw, with the remaining 75 per cent being used to grow cash balances and support new lending.
When cash balances are higher and there is a withdrawal queue, all repayments and new deposits will be diverted towards access requests.
Priority would be given to those with discounted requests on a first-in-first-out basis.
Maximum supported level
The highest category is the maximum supported level.
This is where there is too much cash, in which case withdrawals would be allowed but Assetz Capital would close to new investment until overall cash balances reached the maximum level that had been set.
The platform also said it will alter its terms and conditions from 1 May to introduce a one per cent fee for investors to withdraw funds from its auto-invest accounts, which will only be implemented during “non-normal market conditions.”
“The withdrawal fee will only apply to access account investors, including those who have used the exit accounts, who have an active withdrawal request during non-normal market conditions,” Assetz Capital said in a note to investors.
“Anyone who does not have a withdrawal request, who is content to hold their investment and receive their interest, will not be affected by the fee.
“It is intended that the withdrawal fee will be a charge of one per cent a year and will be deducted from an investor’s interest payment at the end of each month.
“The fee only applies to the amount being withdrawn and is time-weighted, so you’ll only be charged for the time you are actively withdrawing eligible funds.”
The platform was hit by a swathe of withdrawal requests since the pandemic outbreak last year.
It also introduced a lender fee in May 2020, which is due to be removed in June.
In February, Assetz Capital said it plans to return to new lending via its manual lending accounts and access accounts could follow this month, as the platform works to return to pre-Covid operations.
Assetz Capital chief executive Stuart Law (pictured) also said last week that the platform may have to limit investment if it had too much cash coming in.