Haircut: Difference between revisions
imported>Doug Williamson (Add definition. Source: BIS https://www.bis.org/bcbs/publ/d499.pdf) |
imported>Doug Williamson (Classify page.) |
||
| Line 53: | Line 53: | ||
== See also == | == See also == | ||
* [[Bilateral repurchase agreement]] | |||
* [[Collateral]] | * [[Collateral]] | ||
* [[High Quality Liquid Assets]] | * [[High Quality Liquid Assets]] | ||
* [[Margin]] | |||
* [[Repurchase agreement]] | * [[Repurchase agreement]] | ||
* [[Tri-party repurchase agreement]] | * [[Tri-party repurchase agreement]] | ||
[[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]] | |||
Revision as of 13:51, 26 August 2020
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.
