Did you know?

Click any word in a definition or example to find the entry for that word


adjective business

used to describe a loan or other financial agreement which causes very serious business problems for a bank or financial organisation


noun [uncountable] business

'British taxpayers will be liable for more than £150 billion of potentially toxic mortgage debt following the nationalisation of Bradford & Bingley, one of the country's biggest mortgage lenders.'

The Telegraph 30th September 2008

'A more effective strategy would be for the government to target the source of the toxicity by buying actual loans, not the securities that back them. It could do so by taking ownership of entire mortgage pools, starting first with the lowest quality (and most toxic) ones.'

Christian Science Monitor 25th September 2008

Only a short time ago, if something was described as toxic, then the first association you'd make was that of a poisonous substance, something harmful to humans if touched or ingested. In recent weeks, however, it seems that health scares have been eclipsed by wealth scares whenever the word toxic appears in print.

I'm referring, of course, to the newly emerging use of toxic in financial contexts, where it describes transactions, typically loans, which have a seriously negative impact on the business activities of major banks and financial institutions.

2008 has witnessed what has been described as a 'financial earthquake' across the globe

On 29th September 2008, the UK government announced their intention to nationalize Bradford & Bingley, Britain's ninth largest mortgage lender. Bradford & Bingley thereby became the fourth major UK bank in the last year to either be rescued by the state or sold to a rival to prevent collapse. At the heart of this and the other bank's problems is the so- called issue of toxic assets, typically in the form of loans which are not repaid, either because the value of the asset against which they are secured has fallen dramatically, or because they have been issued to 'risky' borrowers (those with insecure incomes) who later default on repayments.

The issue of toxic assets is not confined to the UK. 2008 has witnessed what has been described as a 'financial earthquake' across the globe, which has included the collapse of the Washington Mutual in the United States (the largest US banking failure since the Great Depression), and the European bank Fortis, which has been nationalised by the governments of the Netherlands, Belgium and Luxembourg. The linguistic 'fallout' of this financial meltdown has included mainstream use of expressions such as credit crunch (loans being less easily available or very expensive, which slows down economic activity), subprime, stagflation, and now a new sense of the adjective toxic.

Typical collocates of toxic are therefore words such as debt, loan, mortgage or asset. Mirroring its established sense connected with poison, toxic can be used in both attributive position (a toxic loan), or predicative (these assets may be toxic). There is also some evidence for a related noun toxicity.

Background – toxic

The first use of the adjective toxic in financial contexts is thought to be attributable to billionaire Warren Buffett, a US investor and businessman. In a 2003 report to shareholders, Buffett described derivatives (a type of investment that will gain value if the price of a product changes as expected) as “financial weapons of mass destruction”, warning that:

'The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear.'

Letter to shareholders of Berkshire Hathaway March 2003

The adjective toxic dates back to the mid-seventeenth century, and is based on medieval Latin toxicus ('poisoned'), which in turn originates from Greek toxikon (pharmakon), meaning ('poison for') 'arrows'. The core meaning of toxic is of course 'poisonous' as in toxic chemicals/waste. This new financial sense is a domain-specific take on its figurative use to mean 'harmful', for example toxic sarcasm/wit.

by Kerry Maxwell, author of Brave New Words

This article was first published on 8th October 2008.

Open Dictionary

Dunning-Kruger effect

the phenomenon by which an incompetent person is too incompetent to understand his own incompetence

add a word


A must for anyone with an interest in the changing face of language. The Macmillan Dictionary blog explores English as it is spoken around the world today.

global English and language change from our blog