Collateral risk refers to the potential for loss associated with the decline in value of collateral that secures a loan or financial obligation. This risk arises when the market value of the collateral falls below the outstanding amount of the loan, leaving the lender with insufficient security in the event of borrower default. Factors influencing collateral risk include market volatility, changes in asset values, and economic conditions. Effective management involves regular valuation of collateral, diversification of collateral types, and setting appropriate loan-to-value ratios to ensure that the collateral remains adequate to cover potential losses.

• Pillar 1
• Pillar 2

•       Basel Framework
•                 BCBS 347 - Revisions to the Standardised Approach for credit risk
•                 The Basel framework
•                 BCBS 424 - Basel III: Finalising post-crisis reforms