The formation banque et finance is a French system for managing the risk of loan collateral. The formation bank provides the collateral, while the finance bank buys the collateral and secures it against the loan.
It’s a very simple system that works really well. The collateral is created by a borrower who agrees to take out a loan in exchange for the lender’s promise to use the loan to buy the collateral. When the loan gets paid back, the borrower is then able to use the collateral for other purposes. The lender is allowed to sell the collateral at a profit, but it’s the investor who pays the interest on the collateral.
