Once a new debitor has been identified by the commercial department, a basic credit analysis of that debitor is performed by the credit analysis team. Only creditworthy customers can act on an unsecured basis.  In the next step, the parties negotiate and reach the corresponding agreement. In the world`s major trading centres, counterparties primarily use ISDA Credit Support Annex (CSA) standards to ensure that contracts are clear and effective before transactions begin. The important points of the hedging agreement to be examined are: an ISDA master contract is the standard document that is regularly used to regulate transactions on otc-the-counter derivatives. The agreement, published by the International Swaps and Derivatives Association (ISDA), outlines the conditions to be applied to a derivatives transaction between two parties, usually to a derivatives trader and counterparty. The master contract of the ISDA itself is the norm, but it is accompanied by a bespoke timetable and sometimes an annex to support the credit, both signed by both parties in a given transaction. In the modern banking sector, guarantees are mainly used in over-the-counter transactions. However, collateral management has evolved rapidly over the past 15 to 20 years, with the increasing use of new technologies, competitive pressure in the institutional financial industry and increased counterparty risk due to the widespread use of derivatives, asset pool securitization and leverage. As a result, collateral management is now a very complex process, with interconnected functions involving multiple parties.  Since 2014, large pension funds and sovereign wealth funds, which generally hold a high level of high-quality securities, have been exploring ways such as converting security to earn fees.
 Collateral management has many different functions. One of these functions is credit enhancement, where a borrower is able to obtain more affordable credit rates. Aspects of portfolio risk, risk management, capital adequacy, compliance with legislation and operational risk and asset management are also included in many collateral management situations.