(1) The department may accept as a bond a letter of credit subject to the following conditions:

(a) the letter must be issued by a bank organized or authorized to do business in the United States;

(b) the letter must be irrevocable prior to the release by the department;

(c) the letter must be payable to the department in part or in full upon demand and receipt from the department of a notice of forfeiture issued in accordance with ARM 17.86.122;

(d) the letter of credit must provide that, upon expiration, if the department has not notified the bank in writing that a substitute bond has been provided or is not required, the bank shall immediately pay the department the full amount of the letter less any previous drafts;

(e) the letter must not be for an amount in excess of 10 percent of the bank's capital surplus account as shown on a balance sheet certified by a certified public accountant;

(f) the amount of the letter of credit may not exceed three times the bank's maximum single obligation; and

(g) the bank's qualifications must be reviewed by the department yearly prior to the time the letter of credit is renewed. If the department determines that the bank has become unable to fulfill its obligations under the letter of credit, the department shall, in writing, notify the owner and specify a reasonable period, not to exceed 90 days, to replace bond coverage.