Double Leverage

Posted in Finance, Accounting and Economics Terms, Total Reads: 511
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Definition: Double Leverage

Double holding is an indirect way for banks to have more access to debt financing. Thus when a bank holding company offers a debt to another subsidiary bank to acquire a large equity stake in the subsidiary, such a financing method is called double holding. Such debts are financed by the returns on the stocks held by the holding company.


Usually banks have a strict capital requirement structure which doesn’t allow them to hold debt more than a specified limit, thus double holding can be used as a way to provide them access to more capital to fulfill their requirements.

 

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