Large Bank Examination Workshop February 2026

Collateral Management

By the end of the session, the participants will be able to: • Analyze collateral management processes • Determine valuation methodologies for securities and derivatives across firm/desks • Discuss valuation for less liquid securities

85

Collateral Management • Collateral management is the process of providing, taking and monitoring collateral to mitigate the credit risk faced when engaging in transactions where a counterparty is involved • Effective collateral management enables counterparties to mitigate credit risk by identifying and pledging an asset that has a value proportionate to the mark to market value of the transaction • The collateral management process is very similar to futures variation margining on an organized exchange.  The party that has a MTM loss must periodically posts margin/collateral 86

© Global Financial Markets Institute Inc.

43