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PDFWAC 208-512A-007

Other general chapter definitions.

As used in this chapter and to the extent used in RCW 30A.04.111, the following additional terms, unless otherwise indicated, mean:
(1) "ALLL" means a bank's allowance for loan and lease losses.
(2) "Bank" includes a commercial bank chartered and regulated under Title 30A RCW and, to the extent applicable to this chapter pursuant to WAC 208-512A-009, a mutual or stock savings bank chartered and regulated under Title 32 RCW.
(3) "Borrower" means:
(a) A person who is named as a borrower or debtor in a loan or extension of credit;
(b) A person to whom a bank has credit exposure arising from a derivative transaction or a securities financing transaction, entered by the bank; or
(c) Any other person, including a drawer, endorser, or guarantor, who is deemed to be a borrower under the "direct benefit" or the "common enterprise" tests set forth in WAC 208-512A-100.
(4) "Call report" means a bank's Consolidated Report of Condition and Income.
(5) "Capital and surplus" means:
(a) A bank's Tier 1 and Tier 2 capital as reported in a bank's call report; plus
(b) The balance of a bank's ALLL not included in the bank's Tier 2 capital as reported in the bank's call report.
(6) "Close of business" means the time at which a bank closes its accounting records for the business day.
(7) "Control" is presumed to exist when a person directly or indirectly, or acting through or together with one or more persons:
(a) Owns, controls, or has the power to vote twenty-five percent or more of any class of voting securities of another person;
(b) Controls, in any manner, the election of a majority of the directors, trustees, or other persons exercising similar functions of another person; or
(c) Has the power to exercise a controlling influence over the management or policies of another person.
(8) "Credit derivative" has the same meaning as this term has in 12 C.F.R. Part 3, Appendix C, section 2.
(9) "Current market value" means the bid or closing price listed for an item in a regularly published listing or an electronic reporting service.
(10) "Derivative transaction" includes any transaction that is a contract, agreement, swap, warrant, note, or option that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets.
(11) "Director of banks" means the director of the division of banks of the department of financial institutions.
(12) "Division" means the division of banks of the department of financial institutions.
(13) "Effective margining arrangement" means a master legal agreement governing derivative transactions between a bank and a counterparty that requires the counterparty to post, on a daily basis, variation margin to fully collateralize that amount of the bank's net credit exposure to the counterparty created by the derivative transactions covered by the agreement, subject to any monetary threshold requirements as prudently determined by the bank and its counterparty as contained in the master legal agreement.
(14) "Eligible credit derivative" means a single-name credit derivative or a standard, nontranched index credit derivative provided that:
(a) The derivative contract meets the requirements of an eligible guarantee, as defined in 12 C.F.R. Part 3, Appendix C, and has been confirmed by the protection purchaser and the protection provider;
(b) Any assignment of the derivative contract has been confirmed by all relevant parties;
(c) If the credit derivative is a credit default swap, the derivative contract includes the following credit events:
(i) Failure to pay any amount due under the terms of the reference exposure, subject to any applicable minimal payment threshold that is consistent with standard market practice and with a grace period that is closely in line with the grace period of the reference exposure; and
(ii) Bankruptcy, insolvency, or inability of the obligor on the reference exposure to pay its debts, or its failure or admission in writing of its inability generally to pay its debts as they become due and similar events;
(d) The terms and conditions dictating the manner in which the derivative contract is to be settled are incorporated into the contract;
(e) If the derivative contract allows for cash settlement, the contract incorporates a robust valuation process to estimate loss with respect to the derivative reliably and specifies a reasonable period for obtaining post-credit event valuations of the reference exposure;
(f) If the derivative contract requires the protection purchaser to transfer an exposure to the protection provider at settlement, the terms of at least one of the exposures that is permitted to be transferred under the contract provides that any required consent to transfer may not be unreasonably withheld; and
(g) If the credit derivative is a credit default swap, the derivative contract clearly identifies the parties responsible for determining whether a credit event has occurred, specifies that this determination is not the sole responsibility of the protection provider, and gives the protection purchaser the right to notify the protection provider of the occurrence of a credit event.
(15) "Eligible guarantee" means a guarantee that:
(a) Is written and unconditional;
(b) Covers all or a pro rata portion of all contractual payments of the obligor on the reference exposure;
(c) Gives the beneficiary a direct claim against the protection provider;
(d) Is not unilaterally cancelable by the protection provider for reasons other than the breach of the contract by the beneficiary;
(e) Is legally enforceable against the protection provider in a jurisdiction where the protection provider has sufficient assets against which a judgment may be attached and enforced;
(f) Requires the protection provider to make payment to the beneficiary on the occurrence of a default (as defined in the guarantee) of the obligor on the reference exposure in a timely manner without the beneficiary first having to take legal actions to pursue the obligor for payment;
(g) Does not increase the beneficiary's cost of credit protection on the guarantee in response to deterioration in the credit quality of the reference exposure; and
(h) Is not provided by an affiliate of the bank, unless the affiliate is an insured depository institution, bank, securities broker or dealer, or insurance company that:
(i) Does not control the bank; and
(ii) Is subject to consolidated supervision and regulation comparable to that imposed on U.S. depository institutions, securities broker-dealers, or insurance companies (as the case may be).
(16) "Eligible protection provider" means:
(a) A sovereign entity (a central government, including the U.S. government, an agency, department, ministry, or central bank);
(b) The Bank for International Settlements, the International Monetary Fund, the European Central Bank, the European Commission, or a multilateral development bank;
(c) A federal home loan bank;
(d) The Federal Agricultural Mortgage Corporation;
(e) A depository institution, as defined in section 3 of the Federal Deposit Insurance Act, 12 U.S.C. 1813(c);
(f) A bank holding company, as defined in section 2 of the Bank Holding Company Act, as amended, 12 U.S.C. 1841;
(g) A savings and loan holding company, as defined in section 10 of the Home Owners' Loan Act, at 12 U.S.C. 1467a;
(h) A securities broker or dealer registered with the U.S. Securities and Exchange Commission under the Securities Exchange Act of 1934, 15 U.S.C. 78o et seq.;
(i) An insurance company that is subject to the supervision of the Washington state office of insurance commissioner;
(j) A foreign banking organization;
(k) A non-U.S.-based securities firm or a non-U.S.-based insurance company that is subject to consolidated supervision and regulation comparable to that imposed on U.S. depository institutions, securities broker-dealers, or insurance companies; and
(l) A qualifying central counterparty.
(17) "FDIC" means the Federal Deposit Insurance Corporation.
(18) "Federal Reserve Board" means the board of governors of the Federal Reserve System.
(19) "Financial instrument" means stocks, notes, bonds, and debentures traded on a national securities exchange, over-the-counter (OTC) margin stocks as defined in Regulation U, 12 C.F.R. Part 221, commercial paper, negotiable certificates of deposit, bankers' acceptances, and shares in money market and mutual funds of the type that issue shares in which banks may perfect a security interest. Financial instruments may be denominated in foreign currencies that are freely convertible to U.S. dollars. The term "financial instrument" does not include mortgages.
(20) "OCC" means the Office of the Comptroller of the Currency.
(21) "Person" means: An individual; sole proprietorship; partnership; joint venture; association; trust; estate; business trust; corporation; limited liability company; limited liability partnership; not-for-profit corporation; sovereign government or agency, instrumentality, or political subdivision thereof; or any similar entity or organization.
(22) "Qualifying central counterparty" has the same meaning as this term has in 12 C.F.R. Part 3, Appendix C, section 2.
(23) "Qualifying master netting agreement" has the same meaning as this term has in 12 C.F.R. Part 3, Appendix C, section 2.
(24) "Readily marketable collateral" means financial instruments and bullion which are saleable under ordinary circumstances with reasonable promptness at a fair market value determined by daily quotations based on actual transactions on an auction or a similarly available daily bid and ask price market.
(25) "Readily marketable staple" means an article of commerce, agriculture, or industry, such as wheat and other grains, cotton, wool, and basic metals such as tin, copper and lead, in the form of standardized interchangeable units, that is easy to sell in a market with sufficiently frequent price quotations. An article comes within this definition if the exact price is easy to determine and the staple itself is easy to sell at any time at a price that would not be considerably less than the amount at which it is valued as collateral. Whether an article qualifies as a readily marketable staple is determined on the basis of the conditions existing at the time the loan or extension of credit that is secured by the staples is made.
(26) "Securities financing transaction" means a repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction.
(27) "State insured bank" denotes a bank, as defined in this chapter, which is an "insured depository institution" as defined in section 3(c) of the Federal Deposit Insurance Act (12 U.S.C. Sec. 1813(c)).
(28) "State member bank" denotes a bank, as defined in this chapter, which is a member of a federal reserve bank as authorized under section 9 of the Federal Reserve Act (12 U.S.C. Sec. 321) and, for purposes of this chapter, has the same meaning as that term is defined in section 3(d) of the Federal Deposit Insurance Act (12 U.S.C. Sec. 1813(d)).
(29) "Subsidiary" means:
(a) Any company twenty-five percent or more of whose voting shares (excluding shares owned by the United States or by any company wholly owned by the United States) is directly or indirectly owned or controlled by such person, or is held by it with power to vote;
(b) Any company the election of a majority of whose directors is controlled in any manner by such person; or
(c) Any company with respect to the management or policies of which such person has power, directly or indirectly, to exercise a controlling influence, as determined by the division, after notice and opportunity for hearing.
(30) "Type I securities" has the same meaning as set forth in 12 C.F.R. Sec. 1.2(j) and includes:
(a) Obligations of the United States;
(b) Obligations issued, insured, or guaranteed by a department or an agency of the United States government, if the obligation, insurance, or guarantee commits the full faith and credit of the United States for the repayment of the obligation;
(c) Obligations issued by a department or agency of the United States, or an agency or political subdivision of a state of the United States, that represent an interest in a loan or a pool of loans made to third parties, if the full faith and credit of the United States has been validly pledged for the full and timely payment of interest on, and principal of, the loans in the event of nonpayment by the third-party obligor(s);
(d) General obligations of a state of the United States or any political subdivision thereof; and
(e) Municipal bonds if the bank is well capitalized as defined as that term is used in the Federal Deposit Insurance Act, 12 U.S.C. Sec. 1831o (b)(1).
[Statutory Authority: RCW 43.320.040, 43.320.050, 30A.04.030, 30A.04.111, 30A.04.215, 30A.08.140, 32.08.157 and section 939A of the Dodd-Frank Act. WSR 17-24-053, § 208-512A-007, filed 12/1/17, effective 1/1/18. Statutory Authority: RCW 30.04.030, 30.04.111, 30.04.215, 30.08.140, 32.08.157, 43.320.040, and 43.320.050 and Section 611 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (codified as section 18(y) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(y)), which takes effect January 21, 2013. WSR 13-03-037, § 208-512A-007, filed 1/8/13, effective 2/8/13.]
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