Washington Administrative Code › Title 208 - Financial Institutions, Department of (See also Titles 50, 419, and 460) › Chapter 208-512A - Limits on loans and extensions of credit › Section 208-512A-040 - Special rule - Readily marketable staples

Current through Register Vol. 24-14, July 15, 2024
(1) Loans and extensions of credit secured by
					bills of lading, warehouse receipts, or similar documents transferring or
					securing title to readily marketable staples shall be subject to a limitation
					of thirty-five percent of capital and surplus, in addition to the general limit
					set forth in WAC
					208-512A-010, if the market value
					of the staples securing each additional loan or extension of credit at all
					times equals or exceeds one hundred fifteen percent of the outstanding amount
					of such loan or extension of credit.
(2) The following additional terms and
					conditions shall apply to a loan or extension of credit secured by staples:
(a) The staples shall be fully covered by
					insurance whenever it is customary to insure such staples.
(b) For purposes of such a transaction,
					"capital and surplus" shall be calculated at thirty-five percent in addition to
					the general twenty percent limitation.
(c) A "readily marketable staple" means an
					article of commerce, agriculture, or industry of such uses as to make it the
					subject of dealings in a ready market with sufficiently frequent price
					quotations as to make (i) the price easily and definitely ascertainable, and
					(ii) the staple itself easy to realize upon sale at any time at a price which
					would not involve any considerable sacrifice from the amount at which it is
					valued as collateral.
(d) Staples
					eligible for this exception must be nonperishable, may be refrigerated or
					frozen.
(e) This exception is
					intended to apply primarily to basic commodities, such as wheat and other
					grains, cotton, wool, and basic metals such as tin, copper, lead, and the like.
					Whether a commodity is readily marketable depends upon existing conditions and
					it is possible that a commodity that qualifies at one time may cease to qualify
					at a later date.
(f) Fabricated
					commodities which do not constitute standardized interchangeable units and do
					not possess uniformly broad marketability do not qualify as readily marketable
					staples.
(g) Since commodities
					sometimes fail to qualify as nonperishable because of the manner in which they
					are handled or stored during the life of the loan or extension of credit, the
					question as to whether a staple is nonperishable must be determined on a
					case-by-case basis.
(h) This
					exception is applicable to a loan or extension of credit arising from a single
					transaction or secured by the same staples for (i) not more than ten months if
					secured by nonperishable staples, and (ii) not more than six months if secured
					by refrigerated or frozen staples.
(i) The important characteristic of warehouse
					receipts, order bills of lading, or other similar documents is that the holder
					of such documents has control of the commodity and can obtain immediate
					possession. (However, the existence of brief notice periods, or similar
					procedural requirements under state law, for the disposal of the collateral
					will not affect the eligibility of the instruments for this exception.) Only
					documents with these characteristics are eligible security for loans under this
					exception. In the event of default on a loan secured by one of these documents,
					the bank must be in a position to sell the underlying commodity and promptly
					transfer title and possession to the purchaser, thus being able to protect
					itself without extended litigation. Generally, documents qualifying as
					"documents of title" under the Uniform Commercial Code are "similar documents"
					qualifying for this exception.
(j)
					Field warehouse receipts are an acceptable form of collateral when they are
					issued by a duly bonded and licensed grain elevator or warehouse having
					exclusive possession and control of the commodities even though the grain
					elevator or warehouse is maintained on the commodity owner's
					premises.
(k) Warehouse receipts
					issued by the borrower-owner which is a grain elevator or warehouse company,
					duly bonded and licensed and regularly inspected by state or federal
					authorities, may be considered eligible collateral under this exception only
					when the receipts are registered with a registrar whose consent is required
					before the commodities can be withdrawn from the warehouse.