Pledging Requirement


Pledging Requirement
Any legal or bureaucratic requirement that securities be pledged as collateral for public fund deposits or other specific deposits. These securities must be marketable and trade actively. Treasury securities are usually pledged at full face value, while banker's acceptances and commercial paper are taken at 90% of their face value.

Pledging banks usually keep pledged securities in some sort of separate account. These securities can be held by many different institutions, such as an independent trustee or Federal Reserve Bank. They can then serve as collateral for deposits made by local and state governments as well as the federal government.


Investment dictionary. . 2012.

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