The basic form is to borrow high-quality securities and hand over less liquid securities in return. A 2012 Bank of England paper noted that such transactions might increase as the demand for collateral grew. A 2013 UK supervisory statement describes a collateral upgrade transaction as one that exchanges assets of materially different quality for more than a year.
Terms and scope differ by source. The FSB uses collateral transformation without defining it, and the remarks of market participants that the FSB cites include one that speaks of turning assets into cash.