Haircut
Plain definition. A haircut is the discount that applies when the cash lent on a repo trade is less than the market value of the securities pledged as collateral.
Technical definition. In a report published by the Bank for International Settlements, the Committee on the Global Financial System explains that when the cash lent on repo trades is lower than the market value of the collateral security, market participants call the applicable discount a haircut. It applies the term to the discount on the loaned security or cash in securities financing transactions (SFTs), which include repo and securities lending, even though the overcollateralisation in securities lending is called margin; a 5% margin requirement, with collateral at 105% of the loaned security’s market value, equals a haircut of 4.75%. The report adds that haircuts correspond to the amount of funding that must be raised in unsecured debt markets.
On this site
On this site, Haircut comes up in What happens to an XRP-backed loan if XRP’s price drops?, How much can you borrow against XRP, and who sets the haircut?, Can XRP be used as collateral like US Treasuries? and What rules govern lending against XRP, and how do bank capital rules treat it?.
Source
Committee on the Global (bis.org), read October 1, 2026.