Collateral

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Insurance Journal  4 hrs ago  Comment 
The European Union will mount a fresh bid to persuade the United States to free up the billions of euros in collateral it requires foreign reinsurers to set aside against policies. EU states agreed on Tuesday to give the bloc’s … The article...
Wall Street Journal  Mar 5  Comment 
Energy producers are facing a test through the spring as they enter a period where banks re-evaluate the assets against which they can borrow.
Insurance Journal  Feb 11  Comment 
Connecticut Gov. Dannel P. Malloy, a vocal proponent of state-based insurance regulation in the U.S., sent a letter to U.S. Treasury Secretary Jack Lew and U.S. Trade Representative Michael Froman, urging them not to preempt states’ regulations...
MarketWatch  Feb 4  Comment 
The European Central Bank said Wednesday it would suspend a waiver it had extended to Greek public securities used as collateral by the country’s financial institutions for central bank loans.
The Economic Times  Feb 3  Comment 
The move will help develop the corporate debt market, the Reserve Bank of India said in a circular on Tuesday.
Wall Street Journal  Jan 14  Comment 
Harold Hamm, chairman of Continental Resources, has pledged 18% of his company’s shares outstanding as collateral for a personal loan.




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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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