Limitations on lending on security of or acquisition of own stock or members’ interests; sale and ownership of collateral security.
1. Except as otherwise provided in subsection 2, no bank may make any loan or discount on the security of its own stock or members’ interests, nor be the purchaser or holder of any such shares or interests, unless the loan, discount, purchase or holding has been approved by the Commissioner or is necessary to prevent loss upon a debt previously contracted in good faith.
2. A bank may make a loan or discount on the security of its own stock or members’ interests as it deems appropriate if the bank is subject to the reporting requirements set forth in section 12, 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended, 15 U.S.C §§ 78l, 78m, 78n and 78o(d), respectively, or 12 C.F.R. § 335.
3. Stock or interests purchased or acquired to prevent loss upon a debt previously contracted in good faith must, within 2 years after they are purchased, be sold or disposed of at a public or private sale, unless the Commissioner authorizes the bank to hold the stock or interests for a longer period. After the expiration of 2 years or the period authorized by the Commissioner, any such stock or interests not sold or disposed of pursuant to this subsection must, except upon the approval of the Commissioner, be charged to profit and loss and must not be considered as part of the assets of the bank.
4. Any bank may sell or become the owner of any property which may come into its possession as collateral security for any debt or obligation due it, according to the terms of any contract depositing the collateral security. If there is no contract, the collateral security may be sold in the manner provided by law. Any property the bank has in its possession pursuant to this subsection, other than real property, must be sold within 2 years after it is acquired, unless the Commissioner authorizes the bank to hold the property for a longer period.
Last modified: February 26, 2006