Financial matters

Financial securities

Posted by admin - Comments Off

Banks are willing to accept some financial securities as collateral. These securities can include government paper, such as Treasury bills and bonds, and corporate paper, such as bonds and commercial paper. Many banks will also accept traded equity stocks.
Where the loans are used by the borrower to purchase securities the loans are usually subject to margin requirements, where the borrower makes a cash deposit of a defined percentage of the market value of these securities. The minimum margin requirements are usually set by the central bank, bank regulator or securities regulator. Most agreements stipulate that the borrower must provide additional collateral to restore the original level of cover or face the risk that the bank will be entitled to call in the loan or sell part or all of the securities pledged to make good the shortfall.