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What is Unsecured Credit and why is it important?
Unsecured Credit, sometimes referred to as Tangible Net Worth, represents the financial strength of a company based on its assets. When a company applies for Unsecured Credit, it’s essentially borrowing money without providing any collateral. Think of it like a loan you might get from a friend – you’re relying on your good standing and promise to repay.
This is where the Unsecured Credit Cap comes into play. It acts as a safeguard for the system by setting a limit on the amount of unsecured credit a company can obtain. This is a crucial measure to prevent a scenario where a company could take on too much debt, potentially leading to financial instability or even default. By limiting the Unsecured Credit available, we aim to create a more secure and sustainable environment for all market participants.
This adjustment to the Unsecured Credit Cap represents a proactive approach to risk management. By implementing this change, we aim to foster a more resilient and balanced financial ecosystem, ensuring the long-term health and prosperity of the market.
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