OCC 2001-42
OCC Bulletin

Subject:     Community Bank-Focused Regulation Review: 
             Lending Limits Pilot Program
Descrition:  Final Rule

Date:        September 5, 2001

TO:  Chief Executive Officers of National Banks, Federal 
     Branches and Agencies, Department and Division Heads,
     Examining Personnel and Other Interested Parties

a.  Summary of Regulation

The attached final rule amends 12 CFR part 32, the 
regulation governing the percentage of capital and 
surplus that a national bank may loan to any one borrower.
The final rule establishes a three-year pilot program, 
effective on September 10, 2001, that creates new special 
lending limits for loans secured by one- to four-family 
residential real estate loans and small business loans. 
To use these limits, eligible banks must apply to obtain 
approval from their supervisory office.  The final rule 
also permanently modifies the lending limit exemption for
loans to or guaranteed by obligations of state and local 
governments. 

b.  Eligibility for Pilot Program 

A bank is eligible to apply for the pilot program if it:

· Is well capitalized  (Total risk-based capital 10 
  percent or greater, Tier 1 risk-based capital 6 percent
  or greater, leverage ratio of 5 percent or greater, and
  the bank is not subject to any written agreement, order
  or capital directive, or prompt corrective action 
  directive issued by the OCC to meet and maintain a 
  specific capital level for any capital measure.) and 

· Has a composite CAMELS rating of "1" or "2," and "1" or
  "2" ratings for asset quality and management components.

c.  Application Process for Pilot Program

A bank must submit an application and obtain approval 
from its supervisory office before participating in the 
pilot program.  The application must contain:

· Certification that the bank is well capitalized and has
  the requisite CAMELS composite and component ratings;

· Citations to state laws or regulations showing the 
  percentage of capital and surplus, in excess of 15 
  percent, that a state bank is permitted to lend under 
  the state lending limit that is available for loans 
  secured by one- to four-family residential real estate,
  or for small business loans, or for unsecured loans in 
  the state where the main office of the national bank is
  located;

· A copy of a written resolution by a majority of the 
  bank's board of directors approving the use of the 
  limits and confirming the terms and conditions for use 
  of this new lending authority; and

· A description of how the board will exercise its 
  continuing responsibility to oversee the use of this 
  lending authority.  (Oversight may include ongoing 
  monitoring and reporting, and integration of this 
  program into the bank's risk management process.)

The supervisory office may approve a completed application
if approval is consistent with safety and soundness.

Although the rule is effective on September 10, 2001, and
the OCC will not act on applications for the pilot 
program until that time, national banks may begin 
applying for the pilot program immediately.  National 
banks interested in applying should contact their 
supervisory office.  


For further information about this bulletin, national 
banks may contact their supervisory office or:

Ned Pollock, senior advisor, Bank Supervision Operations, 
(202) 874-5020; Barbara Grunkemeyer, national bank 
examiner, Credit Risk, (202) 874-5170; Jonathan Fink, 
senior attorney, Bank Activities and Structure Division, 
(202) 874-5300; or Deborah Katz, senior counsel, 
Legislative and Regulatory Activities Division, 
(202) 874-5090.



________________________
Julie L. Williams 
First Senior Deputy Comptroller and Chief Counsel


Attachment: 66 FR 31114
[http://www.occ.treas.gov/fr/fedregister/2001-42.pdf]