Search: margin loans
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RBA Glossary definition for margin loans
margin loans – Loans which are made to investors to purchase financial assets, usually equities or units in managed funds. These assets are used as security for the margin loan. Margin loan clients are required to keep the ratio of borrowings to the value of underlying security below a pre-arranged level. When the ratio goes above this level, lenders will make a margin call, requiring the borrower to either repay some of the loan or provide additional security to support the loan.
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The Link between the Cash Rate and Market Interest Rates
1 May 1995
RDP
9504
Research Discussion Papers contain the results of economic research within the Reserve Bank
https://www.rba.gov.au/publications/rdp/1995/9504.html
Conclusion
1 May 1995
RDP
9504
In the early 1990s, the relatively large spreads between loan rates and short-term money-market rates meant that, at the margin, bank lending (in particular, housing lending) was highly profitable. ... In response, banks competed aggressively for new
https://www.rba.gov.au/publications/rdp/1995/9504/conclusion.html
Introduction
1 May 1995
RDP
9504
This competition, while taking time to develop, has played some role in the recent narrowing of margins. ... For a more detailed discussion of average interest rate margins see Reserve Bank of Australia (1994).
https://www.rba.gov.au/publications/rdp/1995/9504/introduction.html
What Determines the Degree of Pass-Through?
1 May 1995
RDP
9504
Working in the other direction, strong demand for housing loans may have meant that banks could maintain these margins. ... boom, they have not increased loan margins and provisions in expectation of higher future loan defaults and they have not reduced
https://www.rba.gov.au/publications/rdp/1995/9504/what-determines-the-degree-of-pass-through.html
References
1 May 1995
RDP
9504
Harper, I. (1994), “Bank Interest Rate Margins”, Submission to the House of Representatives Standing Committee on Banking, Finance and Public Administration, May. ... Lowe, P. and T. Rohling (1992), “Loan Rate Stickiness: Theory and Evidence”,
https://www.rba.gov.au/publications/rdp/1995/9504/references.html
The Pass-Through of Changes in the Cash Rate
1 May 1995
RDP
9504
It shows quite different degrees of pass-through for the four loan rates examined. ... Overall, relative to the size of the changes in the cash rate, changes in the margin have been relatively small.
https://www.rba.gov.au/publications/rdp/1995/9504/pass-through-of-changes-in-the-cash-rate.html