Collateral
in sentence
330 examples of Collateral in a sentence
Think of climate change; the risks of nuclear energy and proliferation; terrorist threats (qualitatively different from the dangers of conventional war); the
collateral
effects of political instability; the economic repercussions of financial crises; epidemics (whose risks increase with greater mobility and free trade); and sudden, media-fueled panics, such as Europe’s recent cucumber crisis.
Financial booms provide
collateral
that supports debt-financed spending.
For example, short-term funding markets involve the supposedly safe business of borrowing against the
collateral
of tradable securities, which is a mainstay of how broker-dealers finance themselves.
Unfortunately, as we discovered during the financial crisis, such markets can become less liquid or even dry up completely when lenders start to fear unforeseen problems, either with borrowers or with the assets that they pledge as
collateral.
Five billion of the world’s 7.3 billion people hold their tangible and intangible assets outside of the formal legal system; these assets cannot be invested or create surplus value, nor can they serve as
collateral
for loans or as identification for accessing public services.
Iran pursued mass prosecutions of government critics following President Mahmoud Ahmadinejad’s controversial reelection in 2009, and it now appears that some of Ahmadinejad’s allies may themselves become
collateral
damage in his conflict with Supreme Leader Ayatollah Ali Hosseini Khamenei, facing politically motivated criminal trials.
With the official banking system thus constrained, it allocated the remaining credit to large enterprises and those with sufficient collateral, resulting in an uneven distribution of loans across regions and sectors.
A further difference between the eurozone and the US is that the Federal Reserve normally lends only against public debt, and accepts only federal debt (T-bills) as
collateral.
The ECB, on the other hand, accepts private assets and, in the absence of federal debt, national debt as
collateral.
This puts the ECB in a very different position from the Fed, because the quality of its
collateral
is determined along national lines.
If the Greek people decide in a referendum to default, the ECB will incur large losses, as much of its
collateral
would become worthless and the Greek banking system would collapse.
It would be better if the EU kept the Luxembourg fund for real emergency measures, and if the ECB instructed its member institutions in the GIPS to demand significantly better
collateral
for their lending operations.
Australians rightly worry about becoming
collateral
damage in Trump’s bilateral trade dispute.
The sound principle is excess
collateral.
If there is $120 of
collateral
guaranteeing a $100 bond, the bond is safer, no doubt.
If Greece’s agreement with the EU and the IMF unravels, the European Central Bank will no longer accept Greek bonds as
collateral.
Rosneft has loaned billions to Venezuela’s state oil company – with the Venezuelan-owned US refiner Citgo as
collateral
– in a clear bid to exploit the country’s dire economic situation to gain access to its oil fields.
But commercial banks are reluctant to finance new ventures by unemployed workers with no collateral, making entrepreneurship a difficult path of labor-market adjustment in developed and developing countries alike.
When the
collateral
that underpins excess leverage comes under severe pressure – as was the case for Japanese businesses in the early 1990’s and American consumers in the mid 2000’s – what Koo calls the “debt rejection” motive of deleveraging takes precedence over discretionary spending.
Land holdings can, in turn, be used as collateral, stimulating further credit flows and triggering successive rounds of asset-price appreciation.
The drop in the price of land (and of other assets) impairs their role as collateral, causing domestic credit flows to suffer.
First, when they transact among themselves, large players do not insist on an adequate amount of collateral, relying on the counterparty’s generic creditworthiness (and on the implicit guarantees that governments provided to large firms).
To fix this problem, we need to move the bulk of derivative trading onto organized exchanges, where daily
collateral
requirements would guarantee systemic stability, and price transparency would force competition, reduce margins, and increase the market’s depth.
Furthermore,
collateral
– especially real-estate assets – will continue to be downgraded.
Pretending that banks that passed modest stress tests can be kept open indefinitely with little
collateral
damage is wishful – and dangerous – thinking.
Such a commitment served China extremely well in avoiding
collateral
damage from the crisis of 2008-2009.
In doing so, however, it put itself in peril, because the only way to implement the shift was by lowering the
collateral
requirements for refinancing credit.
To a large extent, this
collateral
consisted of government bonds.
The euro’s appreciation lays bare the huge
collateral
damage that Europe’s rescue policy has caused.
The euro has made Italian government bonds as good as German government bonds, because the ECB is willing to accept both on an equal basis as
collateral
for ECB loans.
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