Misplaced Pages

Marketable collateral

Article snapshot taken from Wikipedia with creative commons attribution-sharealike license. Give it a read and then ask your questions in the chat. We can research this topic together.
This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed.
Find sources: "Marketable collateral" – news · newspapers · books · scholar · JSTOR (February 2016) (Learn how and when to remove this message)

Marketable collateral is the exchange of financial assets, such as stocks and bonds, for a loan between a financial institution and borrower. To be deemed marketable collateral, assets must be capable of being sold under normal market conditions with reasonable promptness at a fair market value. Conditions are based upon actual transactions on an auction or similarly available daily bid, or ask price market.

For banks to accept a borrower’s loan proposal, collateral must be equal or greater than 100% of the loan or credit extension amount. The bank’s total outstanding loans and credit extensions to one borrower may not exceed 15 percent of the bank’s capital and surplus, plus an additional 10 percent of the bank’s capital and surplus.

Risks

Declination of collateral value is the primary risk of securing loans with marketable collateral. Financial institutions closely monitor the market value of any financial asset held as collateral. and take appropriate action if the value subsequently declines below the predetermined maximum loan-to-value ration.

References

  1. Persfull, Dan (November 26, 2007). "Reg O - Defined Marketable Collateral". BankersOnline.com. Archived from the original on March 4, 2014. Retrieved May 29, 2016.
  2. "Collateral". Investopedia. Investopedia, LLC. April 11, 2014. Retrieved May 29, 2016.
  3. "Glossary on Trade Financing Terms - M". legacy.intracen.org. ITC. Archived from the original on June 1, 2016. Retrieved May 29, 2016.
  4. "RB-2001-04 Guidance on Loans Secured by Readily Marketable Collateral". Credit Union Department. Credit Union Department, State of Texas. Archived from the original on September 10, 2015. Retrieved February 2, 2016.


Stub icon

This economics-related article is a stub. You can help Misplaced Pages by expanding it.

Categories: