Recent Posts

The underlying asset being bought

Friday, November 6th, 2009

For retail borrowers this might be a car or a motorcycle. In the corporate world this includes assets as diverse as airplanes, ships and machinery. The main issue here is that the borrower will carry the asset on its own balance sheet at cost, less any depreciation. This provides a realistic assessment of economic value [...]

Exposed to market corrections

Thursday, November 5th, 2009

Banks are exposed to the risk of a property market correction reducing the value of pledged collateral and making it harder to sell in the  event of foreclosure.

Real estate

Thursday, November 5th, 2009

Real estate is the most common type of collateral provided. It has some clear advantages over many other sorts of collateral. It can’t move for a start. Land registries exist in most developed countries that enable clear ownership to be established. The bank has to establish that no other party already has a claim to [...]