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In addition to offering settlement and custodial services, clearing banks provide collateral management services, such as daily revaluation of assets, daily remargining of collateral, and allocation of the borrower's collateral to its lenders in accordance with the lenders' eligibility and risk management constraints.
Loans were not subject to remargining; that is, the haircut would not be altered during the life of the loan.
TALF credit extensions therefore took the form of long-term nonrecourse loans secured by eligible collateral, not subject to mark-to-market or remargining requirements.
With remargining or recourse, a transitory but sharp price decline could force a levered fund to close out its position at a loss.