Loan to security ratio (LSR)

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-06

// THE SHORT ANSWER

A loan to security ratio compares a borrower's total debt with the lending value of all the security the bank holds, where each asset counts only at the share of its value the bank's policy will lend against. A borrower owing US$1.2m, with property valued at US$1.0m counted at 70% and plant valued at US$0.5m counted at 30%, has security worth US$0.85m to the bank and an LSR of about 141%: under-covered. Unlike a loan to value ratio, which sets one loan against one property, it blends the whole security package.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.