Banking and the Role of Collateral and Collateral Management in Banking Facilities

Abstract

As one of the most important economic pillars, the banking system uses instruments such as collateral and collateral to reduce the risk of loan default. These collaterals include real estate, cash deposits, bank guarantees, and other highly liquid assets. Proper management of these collaterals plays a fundamental role in reducing credit risk, increasing public confidence, and economic stability. However, there are several challenges such as complex legal processes, legal changes, and administrative difficulties in seizing and liquidating collateral. This study investigated the factors affecting the enforceability of collateral in legal and institutional systems and used analytical models such as meta-synthesis, interpretive structural modeling, and MICMAC to analyze the relationships between variables. In the qualitative part, the factors were extracted through meta-synthesis and evaluated with the triangular fuzzy Delphi screening technique. The statistical population included university professors, managers, and senior credit experts of the Agricultural Bank, who were selected purposefully. In the quantitative part, the relationships between the factors were analyzed with a combined method of interpretive structural modeling and MICMAC analysis in a fuzzy environment. The results showed that 15 criteria were classified into three main criteria and four levels. Among these factors, the results show that the factors of collateral validity period and the history of the collateral provider are among the most influential indicators that have direct and important effects on other collateral management criteria. In addition, market value, measurability, and legal and ownership indicators are influential at subsequent levels and directly affect security criteria and storage conditions. Finally, this study provides suggestions for improving collateral management policies in the banking system.