14 - What is collateral management?

[Woman 1] Okay, let's stop here. Look at that view!
[Woman 2] Wow. It's absolutely stunning. It's so nice being just us girls. Listen, the other day, I asked Jeremy to lend me €1,000. His best friend! He asked for some kind of guarantee. Can you believe it? I gave my grandmother's ring. 
[Woman 1] Well, don't forget you still owe him €3,000. That's not a lot of collateral. 
[Woman 2] Collateral? What's that? 
[Woman 1] It's something we do with the bank. When you have a financial transaction with one or more parties, the borrower will secure the transaction risk by pledging collateral in the form of cash, securities, or assets to the lender as a guarantee. Dealing with all that is known as “collateral management”. 
[Woman 2] Okay, well, how does it work? 
[Woman 1] It's simple. A business needs a lot of cash to pay a supplier. It also owns a large equity portfolio, a bit like you: you need cash and you own a ring. Understand? In exchange for a cash loan, the bank will ask the business to commit part of its equity portfolio as collateral to secure the loan. Collateral management is a technique the bank uses to quickly identify what can be committed as collateral so that a transaction can be performed. It's a little like knowing the price of your ring.
[Woman 2] Let me get this straight. Whoever is in charge of collateral management also decides what qualifies as collateral? Seriously? You really need to be sure of yourself in that case. 
[Woman 1] Well, exactly. They're responsible if they get it wrong. 
[Woman 2] That's insane. Say, I was wondering if I could ask you something… 
[Woman 1] Me? Sure. 
[Woman 2] I don't suppose you could lend me a thousand euros? 
[Woman 1] Well, that depends. I don't know. Do you have collateral?