Credit Risk Management

Collateral Valuation: Credit Risk: Role of collateral in Financial Intermediation

3 mins read

Financial intermediation refers to the channeling of funds from those who have money (the lender) to those that do not have sufficient money to carry out a desired activitiy (the borrower). Collateral plays a very important role in this process. In this post we will look at the benefits of collateral to the lender and borrower and how it promotes and enhances the financial intermediation process. We also consider the situations where collateral is not easily available and the resultant impact on the financial intermediation process and the economy as a whole.

Collateral Valuation – Extent of collateral & Performance indicators

2 mins read

Earlier we defined collateral in general. However, the basic definition of collateral can be extended to include other elements of the pledged asset, such as asset proceeds, which is elaborated below. We also briefly review some of the performance indicators for collateral with regard to its impact on the timely repayment of outstanding debt.