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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Cash cover (cash-collateralised facility)

What is cash cover, and when does a bank ask for it?

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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

Cash cover is a deposit the borrower places with the bank equal to, or more than, an exposure such as a guarantee, a letter of credit or a card limit, held under a charge or a set-off agreement so it cannot be withdrawn while the exposure lasts. Banks ask for it from new or weaker customers, for guarantees that outlive a facility being repaid, and when a borrower moves banks while guarantees it obtained are still outstanding. The protection lies in the documents: whether the deposit is truly blocked, in the same currency as the exposure, and enforceable if the customer fails.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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