Don't understand a passage

Hi, teachers or native speakers,

I don't understand the following English passage, especially the parts concerning the two prepositions in the context : "WITH a counterparty" and "AT the credit risk of the counterparty"

[By using this established framework, each Fund will hold or provide collateral. To the extent that the Fund’s exposure is over collateralised with a counterparty, the collateral in excess of the marked to market exposure held by the counterparty is at the credit risk of the counterparty. ]

I'll try to rephrase the above passage first and please correct me if I'm wrong (and I'm definately wrong, because my rephrasing doesn't make sense.)

Overall, I think the rough meaning of the above passage is: "if the Fund's exposure is less than the collateral provided BY a counterparty, the counterparty bears the credit risk of the collateral exceeding the market value of exposure (collateral held by the counterparty).

Ok, the above rephrasing is soooo weird. Above all, if the collateral is provided by a counterparty, how does the counterparty also hold the collateral? And why does the counterparty bear the credit risk of the part of collateral exceeding the value of exposure? (at the credit risk of the counterparty) What is the real meaning of the passage?

Please help. Many many thanks.