Collateral

(1) An asset or third-party commitment that is accepted by the collateral taker to secure an obligation of the collateral provider vis-à-vis the collateral taker. In the event that the counterparty defaults on the obligation, the secured party may seize the collateral.
(2) Securities offered to a Central Bank by the counterparty partaking in. Assets pledged (e.g. by credit institutions with central banks) as a guarantee for the repayment of loans, as well as assets sold (e.g. to central banks by credit institutions) as part of repurchase agreements (repos). These pledges are essential to the monetary policy or intra day credit operations.