Haircut: Difference between revisions
imported>Doug Williamson (Add link.) |
imported>Doug Williamson (Mend link.) |
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1. | 1. ''Secured lending'' | ||
''Secured lending'' | |||
An amount deducted from the current market value of an asset used as collateral, to calculate the maximum amount of a loan secured against that asset. | An amount deducted from the current market value of an asset used as collateral, to calculate the maximum amount of a loan secured against that asset. | ||
'''Example''' | '''Example 1''' | ||
Market value of the asset = £100,000. | Market value of the asset = £100,000. | ||
| Line 19: | Line 17: | ||
2. | 2. ''Margin and collateral.'' | ||
A deduction from the current market value of an asset used as collateral in any other transaction, to calculate the maximum amount of a transaction collateralised by that asset. | |||
3. | |||
''Bank supervision - liquidity'' | |||
An amount deducted from the market value of an asset counting towards a bank's High Quality Liquid Assets (HQLAs), to calculate the total HQLAs for regulatory purposes. | |||
4. | |||
A fee or commission, expressed as a percentage of the total value of the related transaction. | |||
5. | |||
The amount of a loss (or an expected loss) on asset, as a percentage of the total value of the asset. | The amount of a loss (or an expected loss) on asset, as a percentage of the total value of the asset. | ||
'''Example''' | '''Example 2''' | ||
Asset total value = EUR 200bn. | |||
Haircut = 50%. | Haircut = 50%. | ||
| Line 35: | Line 50: | ||
Recovery of EUR 100bn. | Recovery of EUR 100bn. | ||
== See also == | == See also == | ||
* [[Basel Committee on Banking Supervision]] (BCBS) | |||
* [[Bilateral repurchase agreement]] | |||
* [[Collateral]] | * [[Collateral]] | ||
* [[High Quality Liquid Assets]] | |||
* [[International Organization of Securities Commissions]] (IOSCO) | |||
* [[Margin]] | |||
* [[Repurchase agreement]] | * [[Repurchase agreement]] | ||
* [[Tri-party repurchase agreement]] | * [[Tri-party repurchase agreement]] | ||
== External link == | |||
[https://www.bis.org/bcbs/publ/d499.pdf Margin requirements for non-centrally cleared derivatives - BCBS and IOSCO] | |||
[[Category:Accounting,_tax_and_regulation]] | |||
[[Category:Identify_and_assess_risks]] | |||
[[Category:Manage_risks]] | |||
[[Category:Risk_frameworks]] | |||
[[Category:Cash_management]] | |||
[[Category:Financial_products_and_markets]] | |||
[[Category:Liquidity_management]] | |||
Latest revision as of 20:37, 24 June 2022
1. Secured lending
An amount deducted from the current market value of an asset used as collateral, to calculate the maximum amount of a loan secured against that asset.
Example 1
Market value of the asset = £100,000.
Haircut = 2%.
The maximum amount of the related secured loan would be:
= £100,000 LESS 2%
= £98,000
2. Margin and collateral.
A deduction from the current market value of an asset used as collateral in any other transaction, to calculate the maximum amount of a transaction collateralised by that asset.
3.
Bank supervision - liquidity
An amount deducted from the market value of an asset counting towards a bank's High Quality Liquid Assets (HQLAs), to calculate the total HQLAs for regulatory purposes.
4.
A fee or commission, expressed as a percentage of the total value of the related transaction.
5.
The amount of a loss (or an expected loss) on asset, as a percentage of the total value of the asset.
Example 2
Asset total value = EUR 200bn.
Haircut = 50%.
Then:
Loss of EUR 100bn (= 50% ).
Recovery of EUR 100bn.
See also
- Basel Committee on Banking Supervision (BCBS)
- Bilateral repurchase agreement
- Collateral
- High Quality Liquid Assets
- International Organization of Securities Commissions (IOSCO)
- Margin
- Repurchase agreement
- Tri-party repurchase agreement
External link
Margin requirements for non-centrally cleared derivatives - BCBS and IOSCO
