OCC Extends and
Expands Three-Year Old Pilot Program that Provides
Expanded Lending
Limits for Community Banks with National Charters
WASHINGTON The
Office of the Comptroller of the Currency is extending and expanding a pilot
program aimed at helping community banks with national charters continue to
provide expanded credit availability to customers in states that have lending
limits higher than those available for federally-chartered institutions.
National banks are
generally allowed to lend no more than 15 percent of their capital on an
unsecured basis plus an additional 10 percent secured by readily marketable
collateral -- to a single borrower. Many states have established higher limits
for the banks they charter.
In June, 2001, the
OCC started a pilot program that allowed national banks with the highest supervisory
ratings to lend up to the state limit -- but no more than 25 percent of capital
-- to single borrowers for small business loans and for loans secured by a
perfected first-lien security interest in 1-4 family real estate in an amount
that does not exceed 80 percent of the propertys appraised value.
The final rule
published in the August 19 Federal Register extends that pilot program to June
11, 2007, and expands it to include agricultural loans. The OCC concluded that
while the program appears to be working well, more data is needed to make a
determination on whether to make the program permanent.
Community national
banks play a vital role in financing the needs of Americas families, farms and
small businesses, said Comptroller of the Currency John D. Hawke, Jr. Our pilot program is intended to give
well-run community banks the flexibility they need to better support their
community and their local economy.
The Comptroller
said the program will continue to include important safeguards to ensure that
that participating banks apply the expanded limits in a safe and sound manner
and that the program will be targeted to community banks.
A national bank
must seek approval from the OCC to participate in the program, and cannot lend
more than $10 million to a single borrower under each special lending limit,
regardless of how much capital it has.
Total loans made under the special authority cannot, in the aggregate,
exceed 100 percent of a banks capital.
Thus, as a practical matter, only banks with less than $1 billion in
assets would be able to take full advantage of the special authority, Mr. Hawke
noted.
We recognize that in some states national
banks that take full advantage of this special authority will still have a
lower loan-to-one-borrower limit than state-chartered institutions, said
Comptroller Hawke. However, we believe our rule enables national banks to
better serve their customers and redresses the competitive disparity created by
high state lending limits while preserving the bedrock safety and soundness
principles that Congress and the American people expect us to uphold.
A national bank is
eligible to participate in the program if it is well capitalized and is rated 1
or 2 under the 5-point Uniform Financial Institutions Rating System, with a
rating of at least 2 for asset quality and for management. To participate, a
bank must obtain OCC approval, a provision that will enable the OCC to monitor
the program effectively and oversee the safety and soundness of institutions
that participate.
# # #
The OCC charters, regulates and examines approximately
2,000 national banks and 51 federal branches of foreign banks in the U.S.,
accounting for more than 56 percent of the nations banking assets. Its mission
is to ensure a safe and sound and competitive national banking system that
supports the citizens, communities and economy of the United States.