Nowadays, many banks will not trade with counterparties unless an appropriate collateral agreement has been put in place.
Some motivations for taking collateral as listed in the ISDA Margin Survey 2001 are as follows:
Many definitions of Collateral Management refer to a Legally watertight, valuable liquid property supporting risk. This definition is quite good as it encompasses a lot of the required features for an effective risk reduction, or a reduction of the risks taken. It has to be legally watertight so you can own it, valuable so it is worth something and liquid so you can sell it.
Collateral management incorporates among other things:
ObjectLab has delivered such a system for a big European Bank with operations on 3 continents.