§412:5-302 Limitations on loans and extensions of credit to one borrower. (a) No bank shall permit a person to become indebted or liable to it, either directly or indirectly on loans and extensions of credit, including any credit exposure arising out of derivative transactions entered into by a bank and its subsidiaries, in a total amount outstanding at any one time in excess of twenty per cent of the capital and surplus of the bank.
(b) As used in this section, a "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, any quantitative measure of or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets.
(c) This section applies to all loans and extensions of credit made and to all credit exposure arising out of derivative transactions entered into by a bank and its subsidiaries. It does not apply to loans and extensions of credit made by a bank or its subsidiaries to its affiliates or subsidiaries.
(d) The limitations set forth in this section shall not apply to:
(1) A bank's eligible acceptances as described in section 412:5-204(b);
(2) A bank's purchase or discount of another bank's acceptances of the kinds described in section 13 of the Federal Reserve Act;
(3) A bank's deposits with a Federal Reserve Bank, Federal Home Loan Bank, or another depository institution made in compliance with this chapter;
(4) A bank's sale of federal funds to another depository institution with a maturity of one business day or under a continuing contract;
(5) Loans and extensions of credit secured by the interest-bearing obligations of the United States or those for which the faith and credit of the United States are distinctly pledged to provide for the payment of the principal and interest thereof or of the State or any county or municipal or political subdivision of this State, issued in compliance with the laws of this State, where the market value of the security shall be at any time not less than one hundred five per cent of the face amount of the loans and extensions of credit;
(6) Loans and extensions of credit to the extent secured by a pledge or security interest in a deposit account in the lending bank; and
(7) Loans and extensions of credit arising from the discount of negotiable or nonnegotiable credit sales contracts which carry a partial recourse endorsement or limited guarantee by the person transferring the credit sales contracts, if the bank's respective file or the knowledge of its officers of the financial condition of each maker of the credit sales contract is reasonably adequate, and an officer of the bank certifies in writing that the bank is relying primarily upon the responsibility of each maker for payment of the credit sales contract, and not upon any partial recourse endorsement or limited guarantee by the transferor. Under these circumstances, the credit sales contract will be considered a loan and extension of credit to the maker of the credit sales contract rather than the seller of the credit sales contract.
(e) In computing the total loans and extensions of credit made by a bank to any person, all loans and extensions of credit by the bank to the person and to any partnership, joint venture, or unincorporated association of which the person is a partner or a member and all credit exposure arising from a derivative transaction with any person and with any partnership, joint venture, or unincorporated association of which the person is a partner or a member shall be included unless the person is a limited partner, but not a general partner, in a limited partnership, or unless the person is a partner in a limited or general partnership, or a member of a joint venture or unincorporated association, if such partner or member, by law, by the terms of the partnership, joint venture, or membership agreement, or by the terms of an agreement with the bank, is not to be held liable to the bank for the debts of the partnership, joint venture, or association. In computing the total loans and extensions of credit made by a bank to any firm, partnership, joint venture, or unincorporated association, all loans and extensions of credit to and all credit exposure arising from a derivative transaction with its individual partners or members shall be included unless such individual partner is a limited partner, but not a general partner, in a limited partnership, or unless such individual partner or member, by law, by the terms of the partnership, joint venture, or membership agreement, or by the terms of an agreement with the bank, is not to be held liable to the bank for the debts of the partnership, joint venture, or association.
(f) Alternatively, a bank may, with the prior approval of the commissioner, comply with the lending limits applicable to federal financial institutions, as and to the same extent it would, at the time, be so required by federal law or regulation if it were a federal financial institution. A bank utilizing this alternative shall use a single method for calculating lending limits, including any credit exposure to the person arising from a derivative transaction, repurchase agreement, reverse purchase agreement, securities lending transaction, or securities borrowing transaction between the bank and the person. In monitoring a bank's compliance with the federal financial institution lending limits, the commissioner shall give substantial weight to the Office of the Comptroller of the Currency's regulations and opinions interpreting the federal financial institution lending limits, including but not limited to those related to the internal model method or the conversion factor matrix method for calculating credit exposure to derivative transactions as described in title 12 Code of Federal Regulations part 32 of the Interim Rule as may be amended. The commissioner will regard the regulations and opinions as strong evidence of safe and sound banking practices. [L 1993, c 350, pt of §1; am L 2013, c 172, §5]
Section: Previous 412-5-205 412-5-205.5 412-5-205.6 412-5-205.7 412-5-206 412-5-300 412-5-301 412-5-302 412-5-303 412-5-304 412-5-305 412-5-306 412-5-400 412-5-401 412-5-402 NextLast modified: October 27, 2016