Deleveraging: meaning, definitions and examples
💳
deleveraging
[ ˌdiːˈlɛvərɪdʒɪŋ ]
finance practice
Deleveraging refers to the process by which an individual or organization reduces its total debt. This can occur through paying down existing liabilities or restructuring debt arrangements. In the context of economics, deleveraging often follows periods of excessive borrowing or financial crises, where entities seek to lower their debt levels to improve their financial stability. The goal is to achieve a healthier balance sheet and lessen the risk of insolvency, which may involve selling off assets or increasing savings rates.
Synonyms
debt reduction, debt repayment, financial purification.
Examples of usage
- The company's deleveraging strategy helped improve its credit rating.
- During the recession, many households engaged in deleveraging to avoid bankruptcy.
- Investors were concerned about the slow pace of deleveraging in the corporate sector.
- Deleveraging is essential for restoring confidence in the financial system.
Translations
Translations of the word "deleveraging" in other languages:
🇵🇹 desalavancagem
🇮🇳 ऋण कम करना
🇩🇪 Entschuldung
🇮🇩 pengurangan utang
🇺🇦 доларування
🇵🇱 deleveraging
🇯🇵 デレバレッジ
🇫🇷 désendettement
🇪🇸 desapalancamiento
🇹🇷 borç azaltma
🇰🇷 부채 축소
🇸🇦 تقليص الديون
🇨🇿 snižení zadlužení
🇸🇰 deleveraging
🇨🇳 去杠杆
🇸🇮 deleveraging
🇮🇸 skuldbinding
🇰🇿 борышты азайту
🇬🇪 სესხის შემცირება
🇦🇿 borcun azaldılması
🇲🇽 desapalancamiento
Etymology
The term 'deleveraging' emerged in the financial lexicon primarily in the late 20th century, gaining prominence in discussions surrounding economics and financial markets during the 2008 financial crisis. It stems from the base word 'leverage,' which refers to the use of various financial instruments or borrowed capital to increase the potential return of an investment. The prefix 'de-' indicates removal or reversal, thus 'deleveraging' denotes the reduction of that leverage. The concept is tied closely to the negative outcomes of excessive debt, prompting economists and financial analysts to explore strategies for deleveraging in both corporate and personal finance. Historical events such as the Great Depression and subsequent economic downturns underscored the importance of managing debt responsibly, leading to a reevaluation of financial practices and policies aimed at preventing leverage-induced economic instability.