2014 Louisiana Laws
Revised Statutes
TITLE 6 - Banks and Banking
RS 6:415 - Loans; other credit exposure; derivative transactions; restrictions; penalties

§415. Loans; other credit exposure; derivative transactions; restrictions; penalties

A. A state bank shall not loan on an unsecured basis to any one borrower, directly or indirectly, an amount in excess of twenty percent of the sum of its capital stock and surplus.

B. A state bank shall not loan on a secured basis to any one borrower, directly or indirectly, an amount in excess of one-half the sum of its capital stock and surplus, provided that all amounts loaned on an unsecured basis up to the limit set forth in Subsection A of this Section shall be added to all amounts loaned on a secured basis pursuant to this Subsection, and the total thereof shall not exceed one half of the state bank's capital stock and surplus. However, a state bank may loan to one borrower an amount not to exceed the sum of its capital stock and surplus, but only when such loan is secured by a pledge of obligations of the United States, or of the state of Louisiana, or any subdivision or municipality thereof, or is a commodity loan secured by readily marketable staples.

C. 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 this Section. For the purposes of this Subsection, 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 the funds in the deposit account that are relied upon for the exemption provided in this Subsection 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.

D. The acceptance of drafts, the issuance of letters of credit, and 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 shall also be subject to this Section. For purposes of this Section, a "derivative transaction" shall include 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.

E. A state bank's capital stock and surplus shall be reduced by the amount of the negative undivided profits taking into account current operating income for purposes of calculating the maximum loan amounts in Subsections A and B of this Section. This Subsection shall not apply to the renewal of a loan that was within the legal loan limit when originated.

F. A state bank may acquire a pool of loans and other extensions of credit or a participation in such pool of loans or extensions of credit from other entities, with partial or full recourse to those entities to the extent that the limits prescribed in Subsections A and B of this Section apply to individual loans contained in the pool, provided that an executive officer of the bank, designated by the board of directors, affirm by affidavit that a representative portion of the individual loans has been reviewed by him, or by a qualified third party who has contracted with the bank for that purpose, to determine that they appear to be credit worthy, and that the bank is relying primarily on the responsibility of each maker for payment of the loans or extensions of credit and not on a full or partial recourse endorsement and guarantee by the transferor.

G. A state bank may make a loan or other extension of credit which would otherwise exceed the limits prescribed in Subsections A and B of this Section when the purpose of the loan is to finance the sale of real estate acquired for debts previously contracted or for use as bank premises. Such loans may only be made upon prior written approval of the commissioner.

H. Whoever violates any of the provisions of this Section may be subject to a fine of not more than one thousand dollars per day for each day such violation continues.

I. The commissioner of financial institutions shall have the authority to promulgate rules and regulations in accordance with the Administrative Procedure Act regarding the provisions of this Section.

Acts 1984, No. 719, §1, eff. Jan. 1, 1985; Acts 1986, No. 9, §1; Acts 1991, No. 200, §1, eff. July 2, 1991; Acts 1992, No. 1129, §1, eff. Sept. 1, 1992; Acts 1993, No. 281, §1, eff. July 1, 1993; Acts 1999, No. 260, §1; Acts 2001, No. 529, §1, eff. June 21, 2001; Acts 2012, No. 30, §1, eff. May 4, 2012.