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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Reservation of rights

What is a reservation of rights letter from a bank?

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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A reservation of rights is a lender's written statement that, although it is not acting on a default now, it is not giving up its right to act later. It exists because a lender that knowingly carries on as normal after a default can be argued to have waived it. Receiving one means the bank has noticed and recorded the breach; it is often the first letter a business sees as its file moves toward a specialist team, and it is not in itself a demand.

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.

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