# haircut

/ˈhɛɹˌkət/ (US) · /hˈeəkʌt/ (UK)

Source: https://englishreference.com/word/haircut
Updated: 2026-06-20

## Senses

### 1. hair grooming

noun · CEFR A2

the act of cutting your hair or the new style you have after it is cut.

For teachers: the act of shortening or styling the hair, or the resulting hairstyle itself.

- I need to get a haircut before the wedding because my hair is getting too long.
- She was so pleased with her new haircut that she immediately booked another appointment for the following month.

### 2. financial loss

noun · CEFR C1 · Technical · Formal

a reduction in the value of an investment or the amount of money a person is paid back.

For teachers: a proportional reduction in the value of an asset or a debt repayment, often during bankruptcy or debt restructuring.

- The investors had to take a twenty percent haircut on their original investment.
- Under the terms of the restructuring agreement, the creditors were forced to accept a significant haircut to prevent the company from total liquidation.

Usage: Often used with the verb 'take'.

Teaching tip: This is a common metaphor in financial news and legal proceedings regarding debt.

### 3. collateral margin

noun · CEFR C2 · Technical · Academic

the difference between the market value of an asset and the amount of a loan it secures.

For teachers: the percentage by which the market value of an asset used as collateral is reduced for the purpose of calculating the capital requirement or loan amount.

- The bank applied a ten percent haircut to the stocks used as collateral for the loan.
- Regulators increased the required haircut on sovereign debt to ensure that banks maintained sufficient liquidity during the market volatility.

Usage: Used as a technical term in risk management and banking.

Teaching tip: This sense is highly specific to banking and risk assessment professionals.

### 4. to reduce value

verb · CEFR C1 · Technical · Formal

to lower the recorded value of an asset or a debt.

For teachers: to apply a reduction to the value of an asset or financial claim.

- The government decided to haircut the bonds to manage the national debt.
- The central bank may choose to haircut certain assets more aggressively if market conditions continue to deteriorate.

Usage: Transitive verb requiring a financial asset as an object.

Teaching tip: The verb form is less common than the noun but appears frequently in high-level financial reporting.

## Examples

- 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.

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