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Double Gearing

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Double Gearing
The act or practice of two or more companies pooling their risk in which each places capital in the other company. In one of the most common examples of double gearing, an insurance company buys shares in a bank, and, in exchange, the bank extends credit to the insurance company.


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Double Gearing describes situations where two institutions use shared capital to protect against risk occurring in separate entities.
S&P believes the concentration risks stemming from capital double gearing have further weakened the already deteriorated capitalization and financial flexibility of the five life insurers,'' it said.
As Standard & Poor's warned in its report "Capital Double Gearing Creating Concentration Risk For Japanese Financial Institutions," published on Sept.
 
 
 
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