haircut
n. countablen. a reduction in the value of an asset or an investment. You use this when a bank or a government agrees to accept less money than they were originally owed.
n. a reduction applied to the value of an asset for the purpose of calculating capital requirements, margin, or collateral. In debt restructuring, it refers to the percentage reduction in the amount that will be repaid to creditors.
The bank had to take a 20% haircut on the loan.
During the debt negotiations, the government asked international bondholders to accept a significant haircut to avoid a total default.
To mitigate the risk of market volatility, the clearinghouse applies a standard haircut to all non-cash collateral deposited by its members, ensuring that the liquidation value remains sufficient.
From hair + cut.
Commonly used with the verbs 'take', 'accept', or 'apply'.