'''Auto-collateralisation''' is a credit operation that is or can be triggered, when a buyer does not have sufficient funds to settle a securities transaction, in order to improve its cash position for the next settlement cycle. The credit provided can be secured using securities already held by the buyer (“collateral stocks”) or the securities that are being purchased (“collateral flows”).
== Types of auto-collateralisation == In TARGET2-Securities, auto-collateralisation may be based either on '''collateral on flow''' or '''collateral on stock'''. The European Central Bank describes collateral on flow as the use of the securities being purchased in the same settlement transaction, while collateral on stock refers to securities already held by the buyer and earmarked for auto-collateralisation.<ref>{{cite web |title=T2S auto-collateralisation: benefits, conditions and functioning |url=https://www.ecb.europa.eu/pub/pdf/other/ecb.t2sautocollateralisation.202511.en.pdf |website=European Central Bank |access-date=13 May 2026 }}</ref>
This distinction is important to the operation of the mechanism, since both forms are used to generate intraday liquidity for securities settlement when the dedicated cash account holder does not have sufficient funds available at the moment of settlement.<ref>{{cite web |title=TARGET2-Securities Annual Report 2023 |url=https://www.ecb.europa.eu/press/payments-news/ecb.t2sar2023.en.pdf |website=European Central Bank |access-date=13 May 2026 }}</ref>
== See also == * T2S
== References == {{Reflist}}
== External links == * [http://www.ecb.europa.eu/paym/t2s/html/index.en.html TARGET2-Securities page on the ECB website] * [http://www.ecb.de/paym/t2s/pdf/outgoing/t2s_infosession_080122_collateral.pdf?f9ed8a81cd41bb265b3b857ff1baf4ce ECB proposal for the T2S Project]
Category:Credit
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