TO: |
Chief Executive Officers of All National Banks,
Department and Division Heads, and All Examining Personnel
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On June 7, 2007, the Office of the
Comptroller of the Currency (OCC) published in the Federal
Register
the attached interim final rule amending 12 CFR 32, which governs
lending limits. The interim final rule makes permanent the lending
limits pilot program, which provides special lending limits for 1-4
family residential real estate loans, small business loans, and
small farm loans. It also eliminates the $10 million cap on loans to
one borrower for each type of loan covered by the program. The other limits and safeguards that apply to the program, as described below, remain unchanged. The OCC is soliciting comments on whether the special lending limit program should be changed in other ways. The comment period ends on July 9, 2007. The following are features of the interim final rule:
- Higher limits linked to state
lending limits.
Under the interim rule, a national bank may use a higher
lending limit for 1-4 family residential real estate loans, small
business loans, and small farm loans, if the state where the bank
is located allows its state-chartered banks to use a higher
lending limit for these types of loans.
- Safeguards adopted from the
pilot program.
Like the pilot program, the interim rule contains a number
of safeguards to ensure that the special lending limits are
available only to banks in good financial condition with a
demonstrated record of making sound loans.
-
Only
well-qualified national banks can make use of the special lending
limits. Under the
interim rule, a national bank must apply to, and receive approval
from, the OCC before making use of the special lending limits for
real estate, small business, and small farm loans. A national bank is eligible
to make use of these special lending limits, if it is well
capitalized and has a rating of 1 or 2 under the CAMELS system, with
at least a rating of 2 for asset quality and for management. A de novo national bank may
apply to use the special lending limits once it meets the criteria
to be an eligible bank.
-
Caps. If authorized to participate
in the pilot program, the amount that a bank may lend under the
special limits is capped in two ways:
·
Individual borrower
cap. The total
outstanding amount of a bank’s loans to one borrower – i.e., loans made under the
combined general limit, the special lending limits, and the interim
rule’s lending limits for real estate, small business, and small
farm loans – may not exceed 25 percent of the bank’s capital and
surplus; and
·
Aggregate cap. The total outstanding amount
of any loan or parts of loans made by a bank to all of its borrowers, under
the special limits of the pilot program, may not exceed 100 percent
of the bank’s capital and surplus.
-
Termination for supervisory
reasons. The
authority given by the OCC to a particular national bank to lend
using these special limits will be subject to termination if a
bank’s continued participation in the program raises supervisory
concerns about credit quality, undue concentrations in the bank’s
portfolio of loans in the three special categories, or concerns
about a bank’s overall credit risk management systems and
controls.
·
Effective date. This interim final rule
became effective on June 7, 2007. It removes the pilot
program’s expiration date; therefore, banks with authority to lend
under the program may continue to do so as long as they are eligible
banks. The OCC is also
soliciting comments on whether the special lending limits should be
expanded in any other way.
For more information, please contact Terry Howard, National Bank
Examiner, Commercial Credit Risk, at (720) 475-7500; in the
Legislative and Regulatory Activities Division at (202) 874-5090,
Mitchell Plave, Counsel, or Stuart E. Feldstein, Assistant
Director.
/signed/
Julie L. Williams
First Senior
Deputy Comptroller and Chief Counsel
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