Collateral

RECENT NEWS
The Straits Times  Apr 8  Comment 
April 09, 2014 1:33 AM DETAILS of a new $100 million scheme aimed at helping firms secure loans by using intellectual property (IP) as collateral have been unveiled.
Mondo Visione  Apr 8  Comment 
Broadridge Financial Solutions, Inc. (NYSE: BR), a leading provider of technology-driven solutions for financial firms and corporate issuers globally, today announced the launch of CollateralPro™. A comprehensive enterprise-wide solution,...
Mondo Visione  Apr 3  Comment 
ICMA’s European Repo Council today published a paper, ‘Collateral is the new cash: the systemic risks of inhibiting collateral fluidity’, which describes the increasing importance of collateral and how it effectively underpins the...
Mondo Visione  Mar 28  Comment 
The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) on additional collateral outflows. These final draft RTS aim at strengthening resilience against liquidity risk in the EU banking sector and...
Banking Business Review  Mar 18  Comment 
Northern Trust is enhancing its collateral management and liquidity solutions in order to help clients meet the requirements of implementing various regulations, such as the Dodd-Frank Act and European Market Infrastructure Regulation (EMIR).
Wall Street Journal  Mar 14  Comment 
Och-Ziff Capital Management Group LLC said it will restate some of its 2012 and 2013 financials after opting to consolidate the collateral loan obligations it manages, following a review by Securities and Exchange Commission staff.
Mondo Visione  Mar 13  Comment 
Broadridge Financial Solutions, Inc. (NYSE:BR), a leading provider of technology-driven solutions for financial firms and corporate issuers globally, together with Lombard Risk Management plc, (LSE:LRM), a leading provider of integrated collateral...
The Hindu Business Line  Mar 10  Comment 
Banks’ demand for collateral for loans from small businesses is a prevalent sore point among SMEs. This was underlined when the audience applauded in response to Muhammed Kunju, CEO Crust ‘n’ Crum...
Mondo Visione  Mar 10  Comment 
Clearstream is rolling out OTC Collateral, a bilateral collateral management service which will significantly strengthen the over-the-counter (OTC) processing capabilities of the Global Liquidity Hub, the company’s integrated risk and liquidity...




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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]

See Also

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