Greek haircut

I keep reading about 'haircuts' in the eurozone, so looked up what a haircut means in the financial world. This definition, from the online Farlex Financial Dictionary , is a bit too technical for me: "The reduction of value to securities used as collateral in a margin loan. That is, when one places securities as collateral, the brokerage making the loan treats them as being worth less than they actually are, so as to give itself a cushion in case its market price decreases."

 

Wikipedia's definition is a bit easier to understand: "In finance, a haircut is a percentage that is subtracted from the market value of an asset that is being used as collateral. The size of the haircut reflects the perceived risk associated with holding the asset. However, the lender has a lien for the entirety of the asset". (A lien, according to the OED, is "a right to retain possession of property (whether land, goods, or money) until a debt due in respect of it to the person detaining it is satisfied". The word 'lien', which dates back to the 16th century, comes originally from the Latin ligamen, bond. Interestingly, the OED draws attention to the different US and British pronunciations of the word lien; it tells us that the usual English pronunciation is, in IPA symbols, /ˈliːən/ ie 'lee-en', where the 'en' sounds like the final syllable of 'fasten', whilst the American pronunciation is /liːn/, which sounds more like 'lean'. I've just checked on howjsay.com, which seems to recognise that I am based in the UK, and it confirms the British pronunciation - you might get a different version if you are in North America.)

 

An article in The Guardian's Pass Notes series simplifies the concept of financial haircuts for non-economists like me; it describes a haircut as "a euphemism for 'disguising the effects of massive fiscal irresponsibility'. 'Taking a haircut' refers to the practice of banks being forced to write down the value of debts they hold, owed by people who can't pay, to avoid the collapse of the entire credit system."

Comments

[John]

Interesting. I had never heard "haircut" used that way. FYI I tried the link and received the Americanised "lean". I'm on a mobile, which, based on the non-access to BBC Radio, seems to be good at ferreting out one's location even with geo-locating turned off. (Not that difficult, actually)

[John]

Just tried howjsay from work 40 miles away and on wifi and got the British pronciation.

[Virtual Linguist]

Thanks for those comments, John. That's interesting about getting the different accents -- I never quite know what to say when I mention the Howjsay site in posts or whenever I mention the BBC site, and iPlayer in particular -- I don't know whether others see or hear the same thing as me.

As for haircut, it seems to be a fairly long-established financial term, but popular newspaper sub-editors like using it because they can create witty headlines based around going bald, banks bristling, expensive haircuts and such like.

[John]

FYI - At home, with a laptop connected via wireless, I connect to BBC Radio with no problem except for football matches, for which I receive a message indicating that I'm in a non-covered area. Cricket is unimpacted.

From exactly the same spot into my wireless router with this Droid, I receive a "service not available in your area" message on all services.

[Marc Leavitt]

Susan:
"Howjsay" is apparently a UK-based website. They often, but not always, give both BrE and AmE pronunciations, in that order. Re lien, the AmE pronunciation is more nuanced than the LEEN pronunciation you mentioned. Here in the US Northeast(I don't have access to the IPA notation), it's more often than not pronounced LEE-(n) with the "n" nearly swallowed. If you were to hear it in the Southeasten US, the LEE part would be even more emphasized, but in general, yes. The common AmE pronunciation IS "LEEN."

[Virtual Linguist]

Thanks, Marc and John, for your informed and informative comments.

[John]

thanks for sharing this information to us!

[sophie]

I have never understood all that Eurozone stuff, it seems to me as if it is just a load of politicians trying to justify why the working man is so skint, while all them will be eating smoked salmon and caviar during the break at the conference.

[ava]

I am one of the many workers who are striking next week in protest of our governments cut backs, I agree with the above comment. I bet they haven't cut back on their luxuries and wondering if they can afford christmas this year.

[amelia]

The Eurozone crisis needs to be sorted why don't they just go back to there own currencies, problem solved.