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Regular Session, 2012
SENATE BILL NO. 164
BY SENATOR MARTINY
BANKS/BANKING. Provides relative to loans by state banks and limitations on loans. (gov
sig)
AN ACT1
To amend and reenact R.S. 6:415(B), (C), (D), (F) and (G), and to enact R.S. 6:415(I),2
relative to banking; to provide certain restrictions and prohibit certain practices; to3
provide for loans, credit exposure, derivative transactions, restrictions, and rules; to4
provide certain definitions; and to provide for related matters.5
Be it enacted by the Legislature of Louisiana:6
Section 1. R.S. 6:415(B), (C), (D), (F) and (G) are hereby amended and reenacted,7
and R.S. 6:415(I) is hereby enacted to read as follows: 8
ยง415. Loans; other credit exposure; derivative transactions; restrictions;9
penalties10
* * *11
B. A state bank shall not loan on a secured basis to any one borrower, directly12
or indirectly, an amount in excess of one-half the sum of its capital stock and surplus,13
provided that all amounts loaned on an unsecured basis up to the limit set forth14
in Subsection A shall be added to all amounts loaned on a secured basis15
pursuant to this Subsection, and the total thereof shall not exceed one half of the16
state bank's capital stock and surplus. However, a state bank may loan to one17 SB NO. 164
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borrower an amount not to exceed the sum of its capital stock and surplus, but only1
when such loan is secured by a pledge of obligations of the United States of2
America, or of the state of Louisiana, or any subdivision or municipality thereof, or3
is a commodity loan secured by readily marketable staples.4
C. Loans and other extensions of credit which are fully secured by a pledge5
of any deposit of the lending bank are not subject to any of the limits prescribed by6
this Section. For the purposes of this Subsection, a loan or other extension of7
credit is " fully secured" only to the extent of the dollar amount of the funds in8
the deposit account at any time while the loan or other extension of credit is9
outstanding, and provided that as to the funds in the deposit account that are10
relied upon for the exemption provided in this Subsection comply with all of the11
following requirements:12
(1) A security interest has been and remains perfected as to third parties13
pursuant to applicable state and federal laws and regulations.14
(2) The bank maintains adequate internal controls and procedures to15
prevent improper release of the pledged deposit account funds.16
(3) The funds in the pledged deposit account are fully collected and17
subject to no superior or intervening right or order of a party other than the18
bank.19
(4) The funds remain on deposit in the deposit account at all times while20
the loan or extension of credit is outstanding.21
D. The acceptance of drafts and , the issuance of letters of credit, and the22
entering into any credit exposure arising from a derivative transaction,23
repurchase agreement, reverse repurchase agreement, securities lending24
transaction, or securities borrowing transaction between the lending bank and25
the borrower shall also be subject to this Section. For purposes of this Section,26
a "derivative transaction" shall include any transaction that is a contract,27
agreement, swap, warrant, note or option that is based, in whole or in part, on28
the value of, any interest in, any quantitative measure of, or the occurrence of29 SB NO. 164
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any event relating to, one or more commodities, securities, currencies, interest1
or other rates, indices, or other assets.2
* * *3
F. In accordance with regulations promulgated by the commissioner, a A4
state bank may acquire a pool of loans and other extensions of credit or a5
participation in such pool of loans or extensions of credit from other entities, with6
partial or full recourse to those entities to the extent that the limits prescribed in7
Subsections A and B apply to individual loans contained in the pool, provided that8
an executive officer of the bank, designated by the board of directors, affirm by9
affidavit that a representative portion of the individual loans has been reviewed by10
him, or by a qualified third party who has contracted with the bank for that purpose,11
to determine that they appear to be credit worthy, and that the bank is relying12
primarily on the responsibility of each maker for payment of the loans or extensions13
of credit and not on a full or partial recourse endorsement and guarantee by the14
transferor.15
G. In accordance with regulations promulgated by the commissioner, a A16
state bank may make a loan or other extension of credit which would otherwise17
exceed the limits prescribed in Subsections A and B when the purpose of the loan is18
to finance the sale of real estate acquired for debts previously contracted or for use19
as bank premises. Such loans may only be made upon prior written approval of the20
commissioner.21
* * *22
I. The commissioner of financial institutions shall have the authority to23
promulgate rules and regulations in accordance with the Administrative24
Procedure Act regarding the provisions of this Section.25
Section 2. This Act shall become effective upon signature by the governor or, if not26
signed by the governor, upon expiration of the time for bills to become law without signature27
by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If28
vetoed by the governor and subsequently approved by the legislature, this Act shall become29 SB NO. 164
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effective on the day following such approval.1
The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Alan Miller.
DIGEST
Present law prohibits a state bank from making a loan on a secured basis to any one
borrower, directly or indirectly, in an amount in excess of one-half the sum of its capital
stock and surplus.
Proposed law retains present law and additionally requires that all amounts loaned on an
unsecured basis up to the limit set forth in present law be added to all amounts loaned on a
secured basis pursuant to the present law, and the total thereof not exceed one half of the
state bank's capital stock and surplus.
Present law provides that loans and other extensions of credit which are fully secured by a
pledge of any deposit of the lending bank are not subject to any of the limits prescribed by
present law.
Proposed law retains present law and further specifies that a loan or other extension of credit
is "fully secured" only to the extent of the dollar amount of the funds in the deposit account
at any time while the loan or other extension of credit is outstanding, and provided that as
to the funds in the deposit account that are relied upon for the exemption provided in this
proposed law comply with all of the following requirements:
(1)A security interest has been and remains perfected as to third parties pursuant to
applicable state and federal laws and regulations.
(2)The bank maintains adequate internal controls and procedures to prevent improper
release of the pledged deposit account funds.
(3)The funds in the pledged deposit account are fully collected and subject to no
superior or intervening right or order of a party other than the bank.
(4)The funds remain on deposit in the deposit account at all times while the loan or
extension of credit is outstanding.
Present law requires that the acceptance of drafts and the issuance of letters of credit are also
subject to present law.
Proposed law retains present law and further specifies that transactions involving the
entering into any credit exposure arising from a derivative transaction, repurchase
agreement, reverse repurchase agreement, securities lending transaction, or securities
borrowing transaction between the lending bank and the borrower are also subject to present
law.
Proposed law defines a "derivative transaction" as 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.
Proposed law authorizes the commissioner of OFI to promulgate rules and regulations in
accordance with the APA regarding the proposed law. SB NO. 164
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Effective upon signature of the governor or lapse of time for gubernatorial action.
(Amends R.S. 6:415(B), (C), (D), (F) and (G); adds R.S. 6:415(I))