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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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11 Sep 2015 RDP 2015-01
Tom Bilston, Robert Johnson and Matthew Read
Indeed, the LGD on credit cards and other personal loans averaged around 50 per cent and 25 per cent in each year, respectively (although these loan types only account for about ... As a consequence, shocks of a magnitude that previously would have
https://www.rba.gov.au/publications/rdp/2015/2015-01/results.html

Method

11 Sep 2015 RDP 2015-01
Tom Bilston, Robert Johnson and Matthew Read
The second step uses the financial margin to calculate each household's probability of default (PD):. ... The month in which a loan is taken out is not available in the dataset, so we assume that all loans were taken out in September.
https://www.rba.gov.au/publications/rdp/2015/2015-01/method.html

Conclusion

11 Sep 2015 RDP 2015-01
Tom Bilston, Robert Johnson and Matthew Read
with negative financial margins) fell from around 12 per cent in 2002 to 8 per cent in 2010. ... Lenders' exposure to households with negative financial margins appears to have remained limited, with expected loan losses (based on the assumptions
https://www.rba.gov.au/publications/rdp/2015/2015-01/conclusion.html

Literature Review

11 Sep 2015 RDP 2015-01
Tom Bilston, Robert Johnson and Matthew Read
expenses. Under this approach, households with negative financial margins are assumed to default on their debts. ... Both approaches have advantages and disadvantages. Financial margin-based approaches more closely match the processes lenders typically
https://www.rba.gov.au/publications/rdp/2015/2015-01/literature-review.html

Limitations and Future Work

11 Sep 2015 RDP 2015-01
Tom Bilston, Robert Johnson and Matthew Read
Within this extra 5 per cent, any household whose financial margin falls below zero is assumed to default instantly. ... Preliminary analysis suggests that including liquid assets directly in households' financial margins does not affect the DAR results.
https://www.rba.gov.au/publications/rdp/2015/2015-01/limitations-future-work.html