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ERM Glossary: Conduit

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A conduit is a financial vehicle that holds asset-backed securities which are financed with short-term deposits (generally commercial paper) that use the asset-backed securities as collateral.

 

Conduits may be used by banks to securities loans that they have made. The conduit will often then have a liquidity line provided by the bank that it can draw down on in the event that it is unable to issue funding to the market.

 


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