> For the complete documentation index, see [llms.txt](https://documents.velo.org/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://documents.velo.org/base-concepts/rebalancing-the-reserve-and-collateral-pool.md).

# Rebalancing the Reserve and Collateral Pool

Collateral asset values may change every day. As a result, collateralization levels will increase and decrease. The DRS continually checks the collateral health and transfers tokens between the collateral and reserve pools to maintain a consistent level of collateralization.

## Logic 

### 1. run the collateral health check to determine the amount of mismatch for the specified stable credit. 

             ● If there are no mismatched amounts then no rebalancing is required. 

### 2. If a mismatch is detected, then initiate transfer between the Collateral and the Reserve pool to ensure that the amount of collateral in the Token Collateral Pool is always in line with the amount of collateral required. 

           ● If the amount of collateral in the Collateral account exceeds the required amount, DRS executes a payment operation to return the excess collateral to the Token Reserve Pool. 

           ● If the amount of collateral in the Token Collateral Pool is less than the required amount, DRS executes a payment operation to get the missing collateral from the Token Reserve Pool.

## Workflow

![](/files/-MHzJqdkBVMHpt8icVgE)


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