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4000 - Advisory Opinions
Applicability of OCC Interpretive Rulings re:
Section 5200 of the Revised Statutes (12 U.S.C. 84) to Insured
Nonmember Banks Through Regulation O
FDIC-81-19
August 4, 1981
Pamela E. F. LeCren, Attorney
At your request the Legal Division has reviewed OCC's interpretative
rulings regarding section 5200 of the Revised Statutes (12 U.S.C.
84) 1
to determine whether or not those rulings are applicable to insured
nonmember banks through Regulation O (12 C.F.R. Part 215).
Federal Reserve Board Regulation O implements § 22(h) of the
Federal Reserve Act which is made applicable to insured nonmember banks
through § 18(j) of the FDI Act as amended by § 108 of Title I of
FIRIRCA. Section 22(h)(1) generally provides that no member bank shall
make any loan or extension of credit to its executive officers or
principal shareholders that is in excess of the limits on loans to a
single borrower established by section 5200 of the Revised Statutes.
The limit established by § 5200 is 10% of the bank's paid-in capital
and unimpaired surplus. Section 215.2(f) of Regulation O further
provides that the lending limit to which executive officers and
principal shareholders are subject shall be 10% of the bank's capital
and unimpaired surplus "or any higher amount permitted by section
5200 of the Revised Statutes for the types of obligations listed
therein as exceptions to the 10 percent limit."
It is our opinion, and that of the legal staff of the Federal
Reserve Board, that § 22(h) and Regulation O only incorporate the
10% lending limit established by § 5200 of the Revised Statutes and
the exceptions thereto. The term obligation as used in
§ 5200 and construed in OCC's interpretative rulings is not
incorporated in either § 22(h) or Regulation
O. 2
{{4-28-89 p.4085}}Inasmuch as section 22(h) and
Regulation O use the term extension of credit which has its
own separate and distinct definition, the interpretative rulings
pertaining to what constitutes an obligation and how loans to separate
borrowers are to be combined are not relevant to the application of
Regulation O. The rulings on the exceptions to the 10% limit are,
however, relevant. 3
The Legal Division, as well as the FRB staff, have informally adopted
the position that while the FDIC and FRB are free to construe the
exceptions to § 5200 in a manner differently than the OCC, OCC's
interpretative rulings will be
followed.
1 The interpretations are published in the Comptroller's Manual
for National Banks (pages 3-1 through 3-11) and 12 C.F.R. Part 7
(Subpart A). Go Back to Text
2 Section 5200 of the Revised Statutes provides that "the
total obligations to any national banking association of any person,
copartnership, association, or corporation shall at no time exceed 10
per centum of the amount of the capital stock of such association
actually paid in and unimpaired and 10 percentum of its unimpaired
surplus fund." Go Back to Text
3 With reference to exception 6 "Loans secured by shipping
documents or warehouse receipts covering readily marketable staples"
(Comptroller's Manual for National Banks, page 3-7 and page 3-8), the
applicable lending limits are illustrated in chart form. The
permissible amount of an uncollateralized loan at 10% of a lending
bank's unimpaired capital and surplus of $1 million is set forth, as
well as permissible amounts of collateralized loans at more than 10%
of the bank's capital and surplus. While the chart does not constitute
approval for lending on an unsecured basis, it does provide guidelines
for such lending. Go Back to Text
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