Collateral Management
What is Collateral Management? At a high level, collateral management is the function responsible for reducing credit risk in unsecured financial transactions. Collateral has been used for hundreds of years to provide security against the possibility of payment default by the opposing party (or parties) in a trade. In our modern banking industry collateral is used most prevalently as bilateral insurance in over the counter (OTC) financial transactions. However, collateral management has evolved rapidly in the last 15-20 years with increasing use of new technologies, competitive pressures in the institutional finance industry, and heightened counterparty risk from the wide use of derivatives, securitization of asset pools, and leverage. As a result, collateral management now encompasses multiple complex and interrelated functions, including repos , tri-party / multilateral collateral , collateral outsourcing , collateral arbi...