They'll want wider spreads between their borrowing and lending rates to offset the risks of declines in building collateral values.
Bankers still struggling with declining collateral values on their commercial real estate loans and tougher scrutiny from examiners aren't going to risk hits to their capital by lending to weak firms until the economy is in a clear upswing, says James Whitney, of Conway MacKenzie, a Birmingham, Mich.
In Diebold's case, like many others, his 401(k) plan appears to be contractually on the hook for any decline in the value of collateral received in exchange for the securities it lent out.
The only thing in Afghanistan that could possibly count as collateral value is its citizenry.
He knew that a Lehman bankruptcy was likely, and that it would significantly increase the pressure on A.I.G., with additional collateral calls and a probable decline in the value of its investment portfolio.
It said negotiations deteriorated late on Wednesday when the pricing service used by certain lenders reported a decline in the value of the mortgage-backed securities collateral that is expected to result in additional margin calls on Thursday of about $97.5 million.
According to a person briefed on the transactions, Goldman Sachs, one of Dexia's biggest trading partners, has asked for collateral equal to nearly twice the decline in market value of its deals.
According to Carl B. Weinberg, chief economist at High Frequency Economics, a consulting firm in Valhalla, N.Y., bank credit in Japan contracted 4.7percentt in the 12 months ended in May, reflecting the dead weight of bad loans held by lenders and the continued decline in the value of assets that borrowers can use as collateral.
Of that total, $818 million was for the reduced value of companies Boeing bought and $159 million was for write-downs in its finance portfolio, reflecting the decline in airline customers' credit ratings, jet collateral values and a steep fall in aircraft lease rates.
Refinancing difficulties are also a problem, it said, "because collateral values have declined significantly since these loans were originated".
A ten percent decline in the value of the property means a fifty percent decline in your cash downpayment".
