Final answer:
In securities lending transactions, the earnings on collateral paid by the lender to the borrower are referred to as rebates, which differ from traditional interest payments associated with loans or bonds.
Step-by-step explanation:
Earnings on collateral in a securities lending transaction paid by a lender to a borrower are referred to as rebates. In the context of securities lending, the borrower pays a fee to the lender for the borrowed securities, which includes any agreed upon earnings on collateral. This contrasts with traditional lending where a borrower pays interest to a lender. For instance, when a corporate bond is issued, the bondholders are typically paid interest, known as coupons, for their investment. However, in securities lending, the payment equivalent to interest, made in the opposite direction from the borrower to the lender, is known as a rebate. It is important to understand these terms as they relate to different financing mechanisms when discussing borrowing, banks and bonds.