Collateral

RECENT NEWS
Mondo Visione  May 13  Comment 
Euroclear and The Depository Trust & Clearing Corporation (DTCC) have signed a Memorandum of Understanding to create a joint collateral processing service which will significantly increase efficiency, reduce risk and support the growing collateral...
Mondo Visione  May 7  Comment 
A collateral management service developed for customers of both Clearstream and BNP Paribas Securities Services has now launched across multiple markets and for both fixed income and equities. The live service enables mutual customers to use...
Mondo Visione  May 7  Comment 
A supplementary paper from the ICMA’s European Repo Council explains the importance of collateral to the stability and efficiency of the financial system. It highlights how the proposed Financial Transaction Tax (FTT) would impact the movement...
Banking Business Review  Apr 26  Comment 
Euroclear Bank has added Standard Chartered to its global ‘Collateral Highway’ service to meet collateral requirements in triparty deals managed by Euroclear, making it the first agent bank in Asia.
Mondo Visione  Apr 25  Comment 
Euroclear Bank announces today that assets for mutual clients held at Standard Chartered will now be available for use as collateral - via Euroclear’s global “Collateral Highway” - to meet collateral requirements in triparty deals managed by...
Reuters  Apr 24  Comment 
Monte dei Paschi had to put up more than 2.8 billion euros ($3.65 billion) by way of collateral for two loss-making derivatives trades at the center of an investigation of alleged fraud at Italy's third-biggest lender.
Mondo Visione  Apr 24  Comment 
More than 92 percent of industry players in Asia say sourcing appropriate collateralto meet new industry practices is a high or very high priority Almost 40 per cent of delegates at Clearstream conference say their institution has no...
Financial Times  Apr 22  Comment 
Rather than reducing risk, as theory would suggest, collateral in practice creates different risks for a number of reasons, Satyajit Das says
Mondo Visione  Apr 5  Comment 
BNY Mellon, the global leader in investment management and investment services, has upgraded its AccessEdge collateral management portal via a newly-established link to Pirum’s tri-party automation service to enhance clients’ ability to manage...
The Hindu Business Line  Mar 21  Comment 
Foreign Institutional investors have been permitted to furnish their investments in Government Securities and corporate bonds with ‘AAA’ ratings as collateral. This follows the announceme...




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Collateral is an asset or assets offered by a borrower in order to procure a loan. Should the borrower default on his payment(s), the lender would take possession of the collateral, which may then be sold to recoup the lender's losses.

Technically, collateral could be any asset, though typically it takes the form of personal property, investment securities, or real estate, the values of which can be readily determined.

Other terms in common use in the market are"margin", "margin asset" and "margin agreement" and similar terms using "credit support" instead of "collateral" or "margin," collateral", "collateral asset" and"collateral agreement." [1]

When a lender offers a loan against collateral offered by the borrower, the lender is said to take a security interest in the collateral. [2]

Examples

  • A woman takes out a mortgage to pay for her home. As collateral, she offers the home itself. Should she default on the loan, the lender (typically a bank) would take possession of the home. The bank may then sell the property to recoup its losses.
  • A man needs a cash loan to pay for several large, immediate expenses. As collateral, he offers the lender his car. Should he default on the loan the lender would take possession of the car, which he or she may sell to recoup losses.
  • In Uruguay, no private bank would accept cattle as collateral for a loan. By contrast, in Kansas, cattle are considered the best collateral for a loan.

14c., "accompanying," also "descended from the same stock," "side by side, "together" "parallel, along the side of" 16c., "colleague, associate." Meaning "thing given as security" is from 1832, Amer.Eng., from plrase collateral security (1720). [3]

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