How are a government's deposits considered collateralized if a single-institution collateral pool is used?

When a government utilizes a single-institution collateral pool for its deposits, the collateralization is based on the proportionate share that the government holds in the overall assets of that pool. This means that while the entire pool may contain various forms of assets backing the deposits, the government can only claim a portion of those assets equivalent to its pro rata share.

This approach ensures that the government has some level of protection against the risk of loss, as it can rely on a defined portion of the pool's assets. However, it is critical to recognize that this does not equate to full coverage of the deposits, as the total collateral provided by the pool may be spread across multiple government entities or organizations. Thus, the correct interpretation is that the deposits are collateralized to the extent of the government's share in the collateral pool's assets, aligning with how public funds are often secured while maximizing efficiency in managing aggregate collateral.