How to Determine a Bank`s Legal Lending Limit

(g) Contractual obligation to make advances. (1) This term includes the obligation of a national bank or savings bank to: (r) natural person: Individual; Association; Joint venture; Association; confidence; Property; Business trust; Society; limited liability company; not-for-profit corporation, sovereign government or political agency, instrument or subdivision thereof; or a similar institution or organization; and (2) This Part does not apply to loans or extensions of credit to a bank or savings association: (iii) Under the laws of some states, persons who provide pasture under a grazing contract may have a lien over livestock equal to the amount owing for pasture. Where a land-based lien made available to the bank or savings association by the secured creditor prior to the loan or extension of the loan is assigned to the bank or savings association by means of a registrable instrument protected by payment to a person other than the bank or savings association against defeat by another lien or claim: Otherwise, it will be covered by this exception, provided that the amount of the lien made available is at least equal to the amount of the loan and that the value of the livestock is at no time less than 115% of the part of the loan or loan extension exceeding the combined general limit of the bank or savings association. If the amount due under the grazing contract depends on future performance, the resulting lien does not meet the requirements of the exception. (ii) the acquisition of ineligible acceptances by a national bank or savings association by a national bank or savings association (representing a loan from the purchasing bank or savings association to the acquiring bank or savings association equal to the purchase price); (q) `loans and loan extensions` means a direct or indirect advance made by a national bank or savings association on behalf of a borrower on the basis of an undertaking by the borrower to repay the funds, or the repayment of certain assets pledged by or on behalf of the borrower; and any credit risk, as determined in accordance with Article 32.9, arising from a derivative transaction or transfer of securities. (ii) a loan or extension of credit, including parts of credit, to the extent that it is secured or secured by a general obligation of a State or political subdivision and in respect of which the lending bank or savings association receives advice from that attorney-general or other judicial officer of a State entitled to comment on the guarantee in question; that the guarantee or surety is a valid and enforceable general obligation of that public body. The legal credit limit cannot exceed 15% of a bank`s own funds and surplus for an individual borrower. If the borrower takes out a secured loan, the bank can lend up to 25% of its capital and surplus. (t) The qualified loan commitment is a legally binding written loan commitment which, in combination with all other outstanding loans and qualified commitments to a borrower, was within the credit limit of the National Bank or savings association at the time of conclusion and has not been disqualified. (B) A written attestation from an officer of the bank or savings association authorized by the board of directors of the bank or savings association or an agent of such officer that the bank or savings association relies primarily on the manufacturer to repay the loan or renew the loan. (ii) the balance of the value adjustment of a national bank or a federal savings association for credit and financial losses, the adjusted value adjustments for credit losses not included in the Tier 2 capital of the bank or savings association for the purpose of calculating risk-based capital referred to in point (c)(2)(i) of this Section, as indicated in the appeal report of the National Bank or savings association. (iv) A description of how the Board of Directors will exercise its ongoing responsibility to oversee the use of this lending authority. (2) Bankers` acceptances.

acceptance by a national bank or savings association of bills of exchange eligible under 12 U.S.C. 372 and 373 or 12 U.S.C. 1464(c)(1)(M), as the case may be, or the purchase by a national bank or savings association of acceptances from other banks or savings associations eligible for discount under these Sections; but excluding: (2) reduction on instalment paper. (i) Loans and extensions of loans from a national bank or savings association to a borrower resulting from the discounting of negotiable or non-negotiable instalment consumer securities within the meaning of Article 32.2(f) that are accompanied by a complete notice of recourse or an unconditional guarantee from the person selling the paper may not exceed 10 per cent of the capital and surplus of the bank or savings association in in addition to the amount provided for in the General Limit. An unconditional guarantee may take the form of a repurchase agreement or a separate guarantee agreement. A condition that is reasonably within the power of the bank or savings bank, such as the repayment of a guarantee, does not imply an unconditional guarantee. Suppose a bank has an existing loan to a business and the owners of the business give pro rata guarantees. Later, one of the guarantors asks for a loan from himself without involving the other guarantors. Details of national bank credit limits are given in Title 12 of the United States Code, Part 32.3. Also, some loans may not be subject to credit limits at all.

These loans may include certain discount loans on commercial paper or commercial paper, bankers` acceptances, loans secured by US bonds, loans associated with a federal agency, loans associated with a state or political subdivision, loans secured by separate deposit accounts, loans to financial institutions with the approval of a specific agency of the Bundesbank, loans to the Student Loan Marketing Association, loans to Industrial Development Agencies, loans to leasing companies, loans from operations to finance certain government securities and intraday credits. B) Bears the full notice of recourse of the owner of the document, except that discounted items in export transactions transferred without recourse or limited recourse must be accompanied by an appropriate insurance assignment to cover political, credit and transfer risks associated with paper, such as insurance provided by the Export-Import Bank. The Code of Legal Credit Limits applies to national banks and savings banks throughout the country. The Federal Law on Credit Limits stipulates that a national bank or savings association may not lend to an individual borrower more than 15% of the capital and surplus of the institution. The legal loan is the maximum amount of money a bank can lend to an individual borrower. (iii) the purchase of third-party securities by a national bank or savings bank, subject to an agreement whereby the seller will redeem the paper in the event of default or after a specified period. The amount of the loan of the bank or savings association is the total outstanding balance of the paper held by the bank or savings association, less the broker`s reserves held by the bank or savings association and held by the bank or savings association as collateral. If the seller`s redemption obligation is limited, the loan from the bank or savings bank is calculated on the basis of the total amount of paper that the seller may ultimately be obliged to buy back. The purchase of third-party securities by a national bank or savings bank without direct or indirect recourse to the seller does not constitute a loan or extension of credit to the seller; (l) `effective margin` means a legal framework for derivative transactions between a bank or savings association and a counterparty that requires the counterparty to record a daily variation margin in order to fully secure the amount of the net credit exposure of the bank or savings association to the counterparty in excess of USD 25 million created by the derivative transactions covered by the scheme;.