Revolving Credit
From Open Risk Manual
Definition
Revolving Credit also Credit Line, Line of Credit is a type of credit product characterised by a Credit Limit, no defined maturity, and no fixed repayment schedule.
Issues and Challenges
- For corporate lines of credit, the actual utilization of the credit limit at the time of default is a significant uncertainty for the lender
- Under Basel II, retail products that can be qualified as "Revolving Retail Exposure" (credit cards) benefit from a lower capital requirement, which may prompt firms to classify products with overlapping characteristics as revolving credit
