What is haircut to investments in Ghana
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A haircut is a term used in Finance. The current market value of an asset and the value quoted for the asset in question for the purpose of calculating loan collateral or in other words, regulatory capital are both ends of a “haircut”.
Simply, the difference between the market value of assets currently and that of the value ascribed to the said asset purposely for calculating loan collateral /or regulatory capital.
When a lender places a value on a collateral asset that is lower than what the requested loan amount calls for, that is a haircut.
In finance, if a bank takes a haircut, it simply means that they have accepted less than what was due in a specific loan account of lending from them.
A haircut can also be said to be a tag lower than the market value which is attached to an asset when it is being used as collateral for a loan.
When a lower than market value is placed on an asset when one wants to use such asset as collateral for a loan then that happening is a haircut placed by the financial institution or lender. Either the low or high (size) of the haircut, will depend on the underlying risk of the asset in question.
SOURCE: Coverghana.com.gh
