Most shareholders compare stock loans on two numbers: how much they can borrow, and at what rate. Both matter, but they sit on top of a quieter term that decides far more — recourse. Recourse answers what happens if the charged shares, when it comes to it, are not enough to clear the loan. It is the term that determines whether a fall in the share price stays contained within the position, or follows the borrower out into the rest of their wealth. This note sets out the three profiles for a Singapore stock loan and how each interacts with the charge over the custody account.
What recourse decides
Imagine a facility that has to be unwound — a margin call goes unmet, say, and the charged shares are realised. The proceeds may fall short of the outstanding balance. Recourse settles a single question: can the lender pursue the borrower personally, and the borrower's other assets, for that shortfall? The collateral mechanics are the same in every case — the borrower opens an account with the designated custodian, over which the lender takes security, where the collateral SGX-listed shares are held, while beneficial ownership is preserved. What differs is how far the lender's claim reaches once that collateral is exhausted.
The three profiles
- Non-recourse — the lender's remedy is limited to the charged shares. No claim against the borrower personally for any shortfall.
- Full-recourse — the borrower remains personally liable for any shortfall once the shares are realised.
- Limited-recourse — a negotiated middle ground; recourse beyond the shares is capped, conditional, or partial.
Non-recourse
In a non-recourse facility the charged shares are the lender's only remedy. If they fall short, the loss is the lender's, not a claim that travels home with the borrower. For the shareholder this is the most protective profile: a fall in the SGX counter is ring-fenced to the position itself, and the rest of the balance sheet — the property, the operating company, the family's other holdings — is untouched. That protection is priced. A lender looking only to the shares for repayment will be more conservative on LTV, more exacting about free float, traded volume, and volatility, and will charge for the risk it is keeping. Non-recourse suits a holder who wants a clean boundary drawn around the transaction and will accept a lower advance to have it.
Full-recourse
At the other end, a full-recourse facility leaves the borrower personally liable for any shortfall. The charged shares in the custodian account are the first place the lender looks, but not the last. For the lender this is the most secure profile, and it usually buys the most favourable headline terms — a higher LTV, finer pricing — because repayment does not rest on the collateral alone. The trade-off is real. A severe, adverse move in the share can produce a personal claim that reaches well beyond the position that was financed. Full-recourse can be entirely rational for a holder with the balance-sheet strength and the conviction in the counter to stand behind it. It should be chosen deliberately, though, not accepted by reflex because the rate read well.
Limited-recourse
Most real transactions sit between the two. Limited-recourse is the negotiated space in which the parties agree that recourse beyond the shares exists but is bounded — capped at an amount, triggered only in defined circumstances, or shared in a defined proportion. This is where structuring earns its keep, because the dial can be set to match the holder's appetite and the lender's comfort with the specific SGX collateral. A conservatively-sized advance against a liquid STI name might carry only a sliver of recourse; a larger advance against a concentrated, lightly-traded position might carry more. The point is that it is a calibrated choice, not a binary handed down by a rate card.
How the share charge interacts with recourse
It helps to separate two things that are easy to conflate. The charge over the custody account is the security — the legal claim over the specific listed shares. Recourse is what happens after that security has been called on and proved insufficient. Every profile here uses the same first-line mechanism: the borrower opens an account with the designated custodian, over which the lender takes security; the shares sit in that account, and on enforcement they are the first asset realised. Non-recourse stops there. Full-recourse continues, as an unsecured personal claim, into the borrower's other assets. Limited-recourse continues only as far as the parties agreed. Reading the charge tells you what is pledged; reading the recourse tells you who carries the downside if the pledge is not enough.
| Term | Non-recourse | Full-recourse |
|---|---|---|
| Borrower liability | Limited to the charged shares | Personal for any shortfall |
| Indicative LTV | More conservative | Higher — collateral plus covenant |
| Pricing | Wider — risk sits with lender | Finer — risk shared with borrower |
| Margin calls | Restore cushion or shares realised | Same, then personal claim if short |
| Downside reach | Ring-fenced to the position | Beyond the financed position |
| Suits | Clean boundary; protect the balance sheet | Strong covenant; best headline terms |
Choosing well
Two facilities with the same LTV and the same rate can distribute risk in opposite directions, because recourse is doing work the headline numbers do not show. A higher advance at a finer rate on full-recourse terms may be a worse outcome for the holder than a smaller advance at a higher rate that is non-recourse — the first quietly puts the rest of the holder's wealth on the line, and the second does not. The right profile depends on the position, the borrower's balance sheet, and how much certainty they want around the worst case.
Recourse is also closely tied to how the advance is sized in the first place. A conservatively-set loan-to-value reduces the chance recourse is ever tested, because it keeps the facility away from the enforcement scenario — which is why the recourse profile and the underlying LTV and volatility are best decided together. We treat recourse as a first-order term, settled openly as part of the indicative structure and reviewed by the borrower's own Singapore counsel before anything is signed. Decide recourse consciously, and the rest of the term sheet reads true.