The pledge rate refers to the ratio of the loan principal to the market value of the standard warehouse receipt, which is generally determined reasonably based on the price difference between futures and spot, price fluctuation range, trend and other factors. When the price difference is large, the price fluctuation range is relatively large, and the price is falling, the pledge rate will be relatively lower. On the contrary, the pledge rate can be higher.
Credit institutions (banks, pawnbrokers) set the pledge rate on the one hand to prevent default risks, and on the other hand to cover their costs of making up for losses and handling collateral after the borrower defaults.
Usually the pledge rate is up to 70%.
The content of this article comes from: "New Compilation of Financial Law (Fifth Edition)" by China Law Publishing House