Minimum Collateralization Ratio (MCR)
The amount of investor money that must always be maintained in cash or cash equivalents is known as the minimum collateralization ratio. This is a legal need to safeguard the market’s integrity. The required minimal collateralization ratio varies depending on the kind of fund.
The minimum debt-to-collateral ratio is crucial because it provides lenders with a standard to utilize when determining whether or not to approve a loan. Although certain jurisdictions have explicit legislation enforcing particular criteria, minimum debt-to-collateral ratios are primarily determined by lenders within the sector and may vary from one lender to another.