derived word

toxicity

/tɒkˈsɪsəti/ noun [U]

 Synonyms and related words

Dangerous or harmful: dangerous, harmful, disastrous...

 Synonyms and related words

Environmental issues: anthropogenic, biodegradable, biohazard...

toxic

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

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 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.