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spyguy

Virgin Money - challenger bank

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Well, apart from nuts BTL, it looks like Virgin money are doing dodgy revenue recognition too:

https://www.ft.com/content/a7df4432-2daa-11e7-9555-23ef563ecf9a#comments

Basicially offering 0% credit card transfer then asuming the person will pay high IRs. And booking a profit before the eggs is even laid.

How in fcksake can the auditor and banking regulators allow this?

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Read this, looks like they're all in there booking fantasy profits, with Virgin just leading the pack.

One of their more flagrant abuses, it shows how indulgent accounting remains under the PRA. And since the scales mentioned dwarf Tesco already, I'm looking forward to seeing it unravel with the accompanying shock, horror.

This is top story on the FT cover today, just in case anyone hasn't seen it.

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5 minutes ago, darkmarket said:

Read this, looks like they're all in there booking fantasy profits, with Virgin just leading the pack.

One of their more flagrant abuses, it shows how indulgent accounting remains under the PRA. And since the scales mentioned dwarf Tesco already, I'm looking forward to seeing it unravel with the accompanying shock, horror.

This is top story on the FT cover today, just in case anyone hasn't seen it.

Huge fcking mess.

Most company frauds centre around revenue recognition.

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1 minute ago, spyguy said:

Most company frauds centre around revenue recognition.

Hard to distinguish fraud from accounting when profits can be booked like this legally. I'm curious to see whether regulators or short-sellers get to the feast first.

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I think that this is actually an acceptable accounting treatment, so the regulator is relatively powerless to stop it unless it is blatantly abused.

What it can do is impose other restrictions, such as capital add ons to neutralise or penalise behaviour it finds unacceptable. 

I don't don't know if this point is on the regulator's agenda, but we know that the growth of unsecured debt is being assessed by the Bank of England as a prudential risk. 

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4 minutes ago, Ah-so said:

I think that this is actually an acceptable accounting treatment, so the regulator is relatively powerless to stop it unless it is blatantly abused.

What it can do is impose other restrictions, such as capital add ons to neutralise or penalise behaviour it finds unacceptable. 

I don't don't know if this point is on the regulator's agenda, but we know that the growth of unsecured debt is being assessed by the Bank of England as a prudential risk. 

I dont think it is.

If you are charging 0% on debt then your interest income is 0.

 

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For the same reason yhat accounys are done with last years numbers. No one does theit accounts with made up numbers from the future.

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4 minutes ago, Ah-so said:

I don't don't know if this point is on the regulator's agenda, but we know that the growth of unsecured debt is being assessed by the Bank of England as a prudential risk. 

But the BoE is providing cheap credit to the banks for exactly this kind of lending at the same time, it's created a systemic risk with one hand and it's using the other to investigate whether that's happened. There's no reason to believe they can / will do this assessment impartially.

As for whether it's acceptable or not, just being legal under bad legislation doesn't make it so.

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4 minutes ago, Ah-so said:

I think that this is actually an acceptable accounting treatment, so the regulator is relatively powerless to stop it unless it is blatantly abused.

Strikes me as another ZIRP story.

I see that Santander are offering a 41 month 0% interest rate balance transfer deal with a 0% transfer fee. They are prepared to give you money almost totally free (there's a £3/month fee on the account) for over three years in the hope that you will spend on the card and you won't tart the debt away at the end of the deal.

All the credit card lenders have been doing the same thing for years already. ZIRP just stretches out the timescale so that the expected cash movements in their favour from today's lending lie further in the future. Presumably it's also the case that as the cash movements today from the interest rate go to zero (literally to zero for some of these deals) the revenue from the cards comes not from the deal you're offering today but from the consequences of the deal unravelling for some of borrowers later, for example if they miss a payment (even though there is no interest due there is still a minimum repayment of 1% of the balance plus a £3/month fee).

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13 minutes ago, spyguy said:

I dont think it is.

If you are charging 0% on debt then your interest income is 0.

 

The risk is not the interest.....it is the actual repayment of the principal.....if people find it difficult to pay low interest and no interest, how can they ever be expected to pay the debt once it has been spent on rent.;)

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6 minutes ago, hotairmail said:

Another issue rises if people holding 0% credit can get it classified as "persistent debt" under new proposals.

In which case, the money owed might risk being written down and the IR suspended.

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There are those new proposals 'persistent debt' which seem okay to me.  Although other articles have 'worriers' not so happy about credit-card getting too involved because 'people need access to credit'.   

I hold off from the beginning of innocence.

Can't see any problem here...   https://uk.virginmoney.com/virgin/credit-cards/balance-transfer-cards/

Seems like max transfer is £15K.

Seems to me VM want to know all your details in applying for a credit-card, including employment and income.

One big-ego BTLer we know of, has banged the credit cards for years, on loads of good stuff and holidays.

Quote

40 months at 0% 
on balance transfers 
1.70% fee
_________
Representative example
Purchase rate:
20.9% p.a.
(variable) on card purchases
Equivalent to:
20.9% APR
representative (variable)
Based on borrowing:
£1,200

 

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3 hours ago, spyguy said:

I dont think it is.

If you are charging 0% on debt then your interest income is 0.

 

Just to clarify, I meant that this is an acceptable accounting treatment. Otherwise the auditors could not have signed the accounts off. 

Whether it is wise or prudent use of the rules is another matter. I do not think that it is either. 

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