Collateral

RECENT NEWS
Mondo Visione  May 19  Comment 
Euroclear today published a report entitled “ Collateral Management in Europe: Searching for Central Intelligence ” at its 14 th  annual Collateral Conference in Brussels, Belgium.   Produced by Aite Group, the report highlights the...
Reuters  May 13  Comment 
China is set to let banks and local governments use municipal bonds as collateral for borrowing, according to sources and an official document seen by Reuters, which could pump prime a fledgling market Beijing hopes will help local authorities...
Mondo Visione  Apr 22  Comment 
Lombard Risk Management plc (Lombard Risk), a leading provider of integrated collateral management, regulatory compliance and reporting solutions for the financial services industry, was presented with the prestigious 2015 Custody Risk Americas...
Insurance Journal  Apr 21  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.




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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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