Haircut: Difference between revisions
imported>Doug Williamson (Layout.) |
imported>Doug Williamson (Expand.) |
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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. | ||
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'''3.''' | '''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. | A fee or commission, expressed as a percentage of the total value of the related transaction. | ||
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== See also == | == See also == | ||
* [[Collateral]] | * [[Collateral]] | ||
* [[High Quality Liquid Assets]] | |||
* [[Repurchase agreement]] | * [[Repurchase agreement]] | ||
* [[Bilateral repurchase agreement]] | * [[Bilateral repurchase agreement]] | ||
* [[Margin]] | * [[Margin]] | ||
* [[Tri-party repurchase agreement]] | * [[Tri-party repurchase agreement]] | ||
Revision as of 15:34, 13 November 2016
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.
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.
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.
