this paper study basic subjects for the nature,functions and roles of collateral by reviews on collateral in the research fields of Economics of Information,Credit Rationing,Risk Management,and Basel II.

Determining appropriate loan-to-value ratios of commodity collateral can make banks mitigate credit risk of inventory financing effectively.

The model shows that the interest rate and collateral in diversified credit contracts may be utilized as screening mechanism to reach a Spence.

The signaling role of collateral,which serves as a measure for the bank to screen risky types of the firms,is emphasized in this paper when the firms in credit market have more risky information on their projects than that of the bank.

In recent years the banks of our country generally adopted rigid pledge credit rationing to small and medium-sized business with on information publication and high credit risk in order to avoid treaty violation risk caused by bad credit, and SMBs entrance to credit market is restricted because of insufficient pledge assets.