creditnoun (uncountable)
KRED-it
The ability to borrow money based on trust that it will be repaid; also the money itself when borrowed.
"Access to affordable credit is essential for small businesses to invest and grow."
creditworthyadjective
KRED-it-wur-thee
Considered reliable enough by a lender to be granted a loan — having good financial history and capacity to repay.
"A high credit score signals that you are creditworthy — banks offer you lower rates."
subprimeadjective
SUB-prym
Describes borrowers with poor credit histories, or loans made to them at higher interest rates to compensate for the greater risk.
"Subprime mortgages were sold to millions of Americans who could not realistically afford to repay them."
toxic assetnoun phrase
TOK-sik AS-et
A financial asset that has lost most of its value and cannot easily be sold — a burden on a bank's balance sheet.
"Banks' balance sheets were loaded with toxic assets — mortgage-backed securities nobody wanted to buy."
mortgage-backed securitynoun phrase
MOR-gij-bakt suh-KYOOR-ih-tee
A financial product created by bundling thousands of mortgages together and selling shares to investors — spreading risk across the system. Abbreviated MBS.
"Mortgage-backed securities spread the risk of subprime lending across the entire global financial system."
contagionnoun (uncountable)
kun-TAY-jun
The spread of a financial crisis from one institution, market, or country to another — like a disease spreading through the system.
"Financial contagion meant that when US banks failed in 2008, banks in Iceland and Ireland quickly followed."
bailoutnoun
BAYL-owt
Financial assistance given to a failing company or bank — often by a government using taxpayer money — to prevent collapse.
"The US government provided a $700 billion bailout to stabilize the banking system in 2008."
too big to failidiom
too big too fayl
Describes a financial institution so large and interconnected that its failure would cause catastrophic systemic damage.
"The 'too big to fail' doctrine means the largest banks can take extraordinary risks, knowing taxpayers will rescue them."
austeritynoun (uncountable)
aw-STER-ih-tee
Government policies of spending cuts and tax rises designed to reduce public debt — often imposed after a crisis.
"Greece endured years of austerity — public sector salaries were cut by 30%."
recessionnoun
reh-SESH-un
A period of significant economic decline, formally defined as two consecutive quarters of negative GDP growth.
"The global recession of 2008–09 led to millions of job losses worldwide."
depressionnoun
deh-PRESH-un
A severe, prolonged economic crisis with catastrophic unemployment and output collapse — far worse than a recession.
"The Great Depression of the 1930s saw US unemployment reach 25% and lasted nearly a decade."
write-offnoun
RYT-awf
A debt officially declared unrecoverable and removed from financial records — a total acknowledged loss.
"The bank wrote off $2.3 billion in bad loans following the collapse of its major client."
defaultnoun / verb
deh-FAWLT
Failure to repay a loan or meet a financial obligation — by an individual, company, or government.
"When Greece defaulted on its IMF loans in 2015, it triggered a crisis across Europe."
sovereign debtnoun phrase
SOV-er-un det
Money borrowed by a national government, typically by issuing bonds.
"Investors began demanding higher yields on Greek sovereign debt, reflecting fears it would default."
restructureverb
ree-STRUK-cher
To reorganize a debt agreement — typically extending repayment terms or reducing the total amount owed — to avoid outright default.
"Argentina restructured its sovereign debt for the third time in 20 years."
speculateverb
SPEK-yoo-layt
To buy or sell financial assets hoping to profit from short-term price changes, accepting significant risk.
"Hedge funds speculated against the pound in 1992, forcing the UK out of the European Exchange Rate Mechanism."
leveragenoun
LEV-er-ij
Using borrowed money to make investments, amplifying both potential gains and potential losses.
"The bank's excessive leverage — $30 borrowed for every $1 of equity — left it catastrophically exposed."
bubblenoun
BUB-ul
A period of rapidly rising asset prices driven by speculation rather than fundamental value — which eventually collapses.
"The US housing bubble inflated throughout the early 2000s and burst violently in 2007–08."
derivativesnoun (plural)
deh-RIV-uh-tivz
Financial instruments whose value is derived from an underlying asset — such as options, futures, and credit default swaps.
"The market for derivatives vastly exceeds the size of the real economy — making it a source of enormous systemic risk."
counterparty risknoun phrase
KOWN-ter-par-tee risk
The risk that the other party in a financial transaction will fail to meet their obligations.
"When Lehman collapsed, counterparty risk meant that every bank doing business with Lehman faced potential losses."
moral hazardnoun phrase
MOR-ul HAZ-erd
The tendency to take greater risks when protected from the consequences — because someone else will bear the cost.
"Bailouts create moral hazard — if banks know they will be rescued, why manage risk carefully?"
fire salenoun
FYR sayl
The rapid selling of assets at greatly reduced prices due to financial pressure — accepting whatever price can be obtained.
"In a fire sale, assets are sold at 10–20 cents on the dollar — whatever the market will bear."
systemic failurenoun phrase
sis-TEM-ik FAYL-yer
A breakdown of the entire financial system, not just individual institutions — where multiple failures reinforce each other.
"The events of September 2008 brought the global financial system to the brink of systemic failure."
short-sellingnoun
short SEL-ing
The practice of borrowing and selling assets you don't own, hoping to buy them back cheaper later and profit from the price fall.
"Short-sellers bet that the bank's stock would fall — and profited massively when it did."