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Liquidity Default

Learn more about the liquidity liquidation process at MoneySwitch.
Given a scenario where a borrower fails to repay the liquidity loan plus interest at the end of the specified duration of the liquidity loan, including any potential liquidity loan extensions, the liquidity loan is classified as a default. During a default, a few different things happen.
  • The MoneySwitch protocol automatically triggers a process where the MasterPool Value is adjusted to account for the impairment amount. In addition there is a redemption of MasterPool Units from FeederPools, affecting FeederPool Values and subsequently impacting the value of depositors' holdings in FeederPools.
  • The defaulted borrower will be blocked from accessing any further loans on MoneySwitch and urged to repay an amount equal the principal of the defaulted loan plus interest. If a borrower fails to repay a defaulted loan, legal actions will pursue in accordance with the framework loan agreement signed when initially on-boarded on MoneySwitch.
A defaulted borrower may resume borrowing on MoneySwitch conditional on repaying the principal and interest on the defaulted loan as well as community approval via the MoneySwitch DAO.