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Shares pledged for bank loans fall amid high rates
Banks typically issue loans against equities at a significant discount to the value of the shares to mitigate risks of loss in case the borrower defaults and the stock price declines.
The number of listed shares pledged by investors as security for loans dropped by 127.6 million units to 6.23 billion in the year to June 2024, indicating that banks may be demanding less risky collateral amid increased defaults from borrowers.
The decline also comes amid high interest rates on loans that have topped 25 percent, putting off prospective borrowers and resulting in a fall in the banking sector's overall loan book.
