Building society and Haircut: Difference between pages

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A deposit taking and lending organisation owned mutually by its customers.
1.  


By contrast, most banks are owned by shareholders, who would not normally or necessarily be customers of the bank.
''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. 




==See also==
'''Example 1'''
*[[Bank]]
 
*[[Credit union]]
Market value of the asset = £100,000.
*[[Mutual]]
 
*[[Shareholder]]
Haircut = 2%.
*[[SMF participant]]
 
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'''
Debt = EUR 200bn.
 
Haircut =  50%.
 
Then:
 
Loss of EUR 100bn (= 50% ).
Recovery of EUR 100bn.
 
 
3.
 
A fee or commission, expressed as a percentage of the total value of the related transaction.
 
 
== See also ==
* [[Collateral]]
* [[Repurchase agreement]]
* [[Bilateral repurchase agreement]]
* [[Margin]]
* [[Tri-party repurchase agreement]]

Revision as of 09:59, 12 August 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

Debt = EUR 200bn.

Haircut = 50%.

Then:

Loss of EUR 100bn (= 50% ).

Recovery of EUR 100bn.


3.

A fee or commission, expressed as a percentage of the total value of the related transaction.


See also