§ 6.2-875. (Effective October 1, 2010) Limitations on obligations ofborrowers.
A. As used in this section:
"Installment consumer paper" shall include installment notes of up to 10years' duration for the purchase of unimproved real property.
"Obligation" means the direct liability of the maker or acceptor of thepaper discounted with or sold to a bank and the liability of the endorser,drawer, or guarantor who obtains a loan from or discounts paper with or sellspaper under his guaranty to such bank. "Obligation" shall include:
1. In the case of obligations of a corporation or a limited liabilitycompany, all obligations of all subsidiaries thereof in which the corporationor limited liability company owns or controls a majority interest; and
2. Any liability of the bank under a letter of credit, other than a letter ofcredit arising out of transactions involving the importation or exportationof goods or the domestic shipment of goods, except to the extent (i) the bankhas a binding participation of another bank, organized under the laws of theCommonwealth or another state or the United States, or a written commitmentby another such bank to assume primary liability therefor or (ii) such bankissuing the letter of credit has in its possession money on deposit to thecredit of such customer or securities or assets readily convertible into cashwith which to honor such letter of credit.
B. Subject to the exceptions set forth in subsections D, E, F, and I, thetotal obligations of any person, including, with respect to a partnership, asprovided in subsection C, the partners having a five percent or greaterinterest in either the income or capital of a partnership other than limitedpartners, to any bank shall at no time exceed 15 percent of the sum of thecapital, surplus, and loan loss reserve of such bank.
C. For the purposes of this section:
1. The obligation of partners in the partnership and the partnership shallnot be combined with each other except if (i) the purpose for which theobligation of any partner was incurred or utilized relates to the partnershipor the purposes of the partnership, including acquisition of an interest inthe partnership, such obligation shall be combined with the obligation of thepartnership or (ii) the primary source of repayment of a partner's individualobligation is the partnership or funds therefrom, the obligation of thepartnership shall be combined with the obligation of such partner, other thana limited partner or partner with less than five percent interest, and thelimitation specified herein shall apply to the combined obligations of eachsuch partner and the partnership. Except in the two instances specified inclauses (i) and (ii), the individual liability of the partner shall not betreated as an obligation of the individual, and the obligations of partner asindividual guarantor on partnership obligations shall not be treated as anobligation of the individual for purposes of computation hereunder when, ineither case, the bank has a certificate of a responsible officer, designatedby the board of directors for this purpose, stating that the responsibilityof the partnership for each obligation has been evaluated and the bank isrelying primarily upon such partnership for the payment of such indebtedness;and
2. There may be counted as part of the surplus (i) the undivided profits asof the date of the most recent call statement and (ii) capital notes anddebentures, the issuance of which has been approved by the Commission,outstanding as of said date, and consisting of debt obligations subordinateto all other contractual liabilities of the bank.
D. The following kinds of obligations shall not be subject to any limitation,except as expressly stated in subdivision 20:
1. Obligations in the form of drafts or bills of exchange drawn in good faithagainst actually existing values;
2. Obligations arising out of the discount of commercial or business paperactually owned by the person, partnership, association, limited liabilitycompany, or corporation negotiating the same;
3. Obligations drawn in good faith against actually existing values andsecured by goods or commodities in process of shipment;
4. Obligations in the form of banker's acceptances of other banks of the kinddescribed in section thirteen of the Federal Reserve Act;
5. Obligations of the United States, the Commonwealth, or any politicalsubdivision of the Commonwealth, including sanitary or public facilitiesdistricts;
6. Obligations fully guaranteed or insured by a state or by a state authorityfor the payment of the obligation of which the faith and credit of the stateis pledged;
7. First mortgage real estate loans that are insured by the Federal HousingAdministrator;
8. Obligations guaranteed as to principal and interest by the United States;
9. Loans in which the Small Business Administration or a federal reserve bankhas definitely agreed or committed itself to participate, to the extent ofsuch participation;
10. Obligations guaranteed by the Small Business Administration or FarmersHome Administration, to the extent of such guaranty;
11. Loans that the Federal Commodity Credit Corporation has definitely agreedto purchase;
12. Direct obligations of, and obligations guaranteed by, the Export-ImportBank;
13. Loans guaranteed by a federal guaranteeing agency pursuant to the DefenseProduction Act of 1950;
14. Bonds and notes of the Federal National Mortgage Association;
15. Bonds, debentures, and other similar obligations of Federal Land Banks,Federal Intermediate Credit Banks, or Banks for Cooperatives issues pursuantto acts of Congress;
16. Obligations of the Federal Financing Bank, the Student Loan MarketingAssociation, the Federal Home Loan Mortgage Corporation, the National CreditUnion Administration, Farm Credit Banks, the Government National MortgageAssociation, or the Commodity Credit Corporation;
17. Time deposits in, or obligations issued by, a Federal Home Loan Bank;
18. Repurchase agreements of obligations authorized by this subsection;
19. Obligations of any person, secured by not less than a like amount ofbonds or notes or other evidences of indebtedness of the United States or ofthe Commonwealth;
20. Obligations as endorser or guarantor of installment consumer paper thatcarry a full or limited endorsement or guarantee of the person transferringthe same when the bank has a certificate of a responsible officer, designatedby its board of directors for that purpose, stating that the responsibilityof the maker of such obligation has been evaluated and the bank is relyingprimarily upon such maker for the payment of such obligation. In such casethe limitations of this section as to the obligations of the maker shall bethe sole applicable loan limitation; and
21. Obligations secured by the pledge or assignment of certificates ofdeposit or saving certificates of the lending bank, to the extent of theprincipal amount of such certificates so pledged or assigned.
E. The following kinds of obligations shall be subject to a limitation of 30percent of such capital and surplus:
1. Obligations as endorser or guarantor of notes, other than commercial orbusiness paper excepted under subdivision D 2 having a maturity of not morethan six months, and owned by the person endorsing and negotiating the same;
2. Obligations of any person in the form of notes or drafts secured byshipping documents or instruments (i) transferring or securing title coveringlivestock or (ii) giving a lien on livestock when the market value of thelivestock securing the obligations is not at any time less than 115 percentof the amount by which the obligations exceed 15 percent of such capital andsurplus; and
3. Obligations secured by bonds or notes of the United States, or bonds ofthe Commonwealth or any of its political subdivisions, if the face valuethereof is at least equal to the excess of the obligations over 15 percent ofsuch capital and surplus.
F. Nonrenewable obligations having not more than 10 months to run consistingof notes or drafts secured by shipping documents, warehouse receipts, orsimilar documents creating a security interest in readily marketable,nonperishable, staple commodities, insured to the extent that insurance iscustomarily required, shall be subject to a sliding scale limitation up to 50percent of such capital, surplus, and undivided profits. The sliding scalelimitation shall require that when the face amount of the obligation exceeds15 percent of such capital and surplus by any number of percentage points upto 35, the market value of the security for the obligation shall exceed theface amount of the obligation by at least the same number of percentagepoints.
G. The Commission shall adopt necessary regulations to require entities thatwould otherwise be treated as separate entities to be treated as related forthe purposes of compelling reporting not more frequently than quarterly, tothe Commission of the aggregate obligations of such parties to the bank. Forthe purposes of this subsection:
1. The Commission may treat as related parties individuals that are in thesame household or that are the parents, grandparents, children, orgrandchildren of each other whether or not in the same household;
2. Any person owning as much as 34 percent of stock of a corporation or beingan officer or director of such corporation may be treated as related to suchcorporation;
3. Any person entitled to a share of the profits and losses of ordistributions from a limited liability company, or who is a manager of amanager-managed limited liability company or a member of a member-managedlimited liability company, may be treated as related to the limited liabilitycompany; and
4. Any person having an interest in income or capital of a partnership may betreated as a related party.
H. All loans made by a bank in excess of 15 percent of its capital andsurplus shall be approved by the board of directors or the executivecommittee of the bank by resolution recorded in the bank's minute book.
I. Notwithstanding the limitations in this section, the Commission may byregulation authorize state banks to make loans to one borrower in suchamounts as may be authorized under any lending limit laws applicable tonational banks.
(Code 1950, § 6-76; 1952, c. 23; 1958, c. 74; 1960, c. 27; 1966, c. 584, §6.1-61; 1970, c. 42; 1977, cc. 110, 466; 1978, c. 683; 1984, c. 134; 1987, c.494; 1994, c. 290; 2002, c. 186; 2006, c. 912; 2010, c. 794.)
§ 6.2-875. (Effective October 1, 2010) Limitations on obligations ofborrowers.
A. As used in this section:
"Installment consumer paper" shall include installment notes of up to 10years' duration for the purchase of unimproved real property.
"Obligation" means the direct liability of the maker or acceptor of thepaper discounted with or sold to a bank and the liability of the endorser,drawer, or guarantor who obtains a loan from or discounts paper with or sellspaper under his guaranty to such bank. "Obligation" shall include:
1. In the case of obligations of a corporation or a limited liabilitycompany, all obligations of all subsidiaries thereof in which the corporationor limited liability company owns or controls a majority interest; and
2. Any liability of the bank under a letter of credit, other than a letter ofcredit arising out of transactions involving the importation or exportationof goods or the domestic shipment of goods, except to the extent (i) the bankhas a binding participation of another bank, organized under the laws of theCommonwealth or another state or the United States, or a written commitmentby another such bank to assume primary liability therefor or (ii) such bankissuing the letter of credit has in its possession money on deposit to thecredit of such customer or securities or assets readily convertible into cashwith which to honor such letter of credit.
B. Subject to the exceptions set forth in subsections D, E, F, and I, thetotal obligations of any person, including, with respect to a partnership, asprovided in subsection C, the partners having a five percent or greaterinterest in either the income or capital of a partnership other than limitedpartners, to any bank shall at no time exceed 15 percent of the sum of thecapital, surplus, and loan loss reserve of such bank.
C. For the purposes of this section:
1. The obligation of partners in the partnership and the partnership shallnot be combined with each other except if (i) the purpose for which theobligation of any partner was incurred or utilized relates to the partnershipor the purposes of the partnership, including acquisition of an interest inthe partnership, such obligation shall be combined with the obligation of thepartnership or (ii) the primary source of repayment of a partner's individualobligation is the partnership or funds therefrom, the obligation of thepartnership shall be combined with the obligation of such partner, other thana limited partner or partner with less than five percent interest, and thelimitation specified herein shall apply to the combined obligations of eachsuch partner and the partnership. Except in the two instances specified inclauses (i) and (ii), the individual liability of the partner shall not betreated as an obligation of the individual, and the obligations of partner asindividual guarantor on partnership obligations shall not be treated as anobligation of the individual for purposes of computation hereunder when, ineither case, the bank has a certificate of a responsible officer, designatedby the board of directors for this purpose, stating that the responsibilityof the partnership for each obligation has been evaluated and the bank isrelying primarily upon such partnership for the payment of such indebtedness;and
2. There may be counted as part of the surplus (i) the undivided profits asof the date of the most recent call statement and (ii) capital notes anddebentures, the issuance of which has been approved by the Commission,outstanding as of said date, and consisting of debt obligations subordinateto all other contractual liabilities of the bank.
D. The following kinds of obligations shall not be subject to any limitation,except as expressly stated in subdivision 20:
1. Obligations in the form of drafts or bills of exchange drawn in good faithagainst actually existing values;
2. Obligations arising out of the discount of commercial or business paperactually owned by the person, partnership, association, limited liabilitycompany, or corporation negotiating the same;
3. Obligations drawn in good faith against actually existing values andsecured by goods or commodities in process of shipment;
4. Obligations in the form of banker's acceptances of other banks of the kinddescribed in section thirteen of the Federal Reserve Act;
5. Obligations of the United States, the Commonwealth, or any politicalsubdivision of the Commonwealth, including sanitary or public facilitiesdistricts;
6. Obligations fully guaranteed or insured by a state or by a state authorityfor the payment of the obligation of which the faith and credit of the stateis pledged;
7. First mortgage real estate loans that are insured by the Federal HousingAdministrator;
8. Obligations guaranteed as to principal and interest by the United States;
9. Loans in which the Small Business Administration or a federal reserve bankhas definitely agreed or committed itself to participate, to the extent ofsuch participation;
10. Obligations guaranteed by the Small Business Administration or FarmersHome Administration, to the extent of such guaranty;
11. Loans that the Federal Commodity Credit Corporation has definitely agreedto purchase;
12. Direct obligations of, and obligations guaranteed by, the Export-ImportBank;
13. Loans guaranteed by a federal guaranteeing agency pursuant to the DefenseProduction Act of 1950;
14. Bonds and notes of the Federal National Mortgage Association;
15. Bonds, debentures, and other similar obligations of Federal Land Banks,Federal Intermediate Credit Banks, or Banks for Cooperatives issues pursuantto acts of Congress;
16. Obligations of the Federal Financing Bank, the Student Loan MarketingAssociation, the Federal Home Loan Mortgage Corporation, the National CreditUnion Administration, Farm Credit Banks, the Government National MortgageAssociation, or the Commodity Credit Corporation;
17. Time deposits in, or obligations issued by, a Federal Home Loan Bank;
18. Repurchase agreements of obligations authorized by this subsection;
19. Obligations of any person, secured by not less than a like amount ofbonds or notes or other evidences of indebtedness of the United States or ofthe Commonwealth;
20. Obligations as endorser or guarantor of installment consumer paper thatcarry a full or limited endorsement or guarantee of the person transferringthe same when the bank has a certificate of a responsible officer, designatedby its board of directors for that purpose, stating that the responsibilityof the maker of such obligation has been evaluated and the bank is relyingprimarily upon such maker for the payment of such obligation. In such casethe limitations of this section as to the obligations of the maker shall bethe sole applicable loan limitation; and
21. Obligations secured by the pledge or assignment of certificates ofdeposit or saving certificates of the lending bank, to the extent of theprincipal amount of such certificates so pledged or assigned.
E. The following kinds of obligations shall be subject to a limitation of 30percent of such capital and surplus:
1. Obligations as endorser or guarantor of notes, other than commercial orbusiness paper excepted under subdivision D 2 having a maturity of not morethan six months, and owned by the person endorsing and negotiating the same;
2. Obligations of any person in the form of notes or drafts secured byshipping documents or instruments (i) transferring or securing title coveringlivestock or (ii) giving a lien on livestock when the market value of thelivestock securing the obligations is not at any time less than 115 percentof the amount by which the obligations exceed 15 percent of such capital andsurplus; and
3. Obligations secured by bonds or notes of the United States, or bonds ofthe Commonwealth or any of its political subdivisions, if the face valuethereof is at least equal to the excess of the obligations over 15 percent ofsuch capital and surplus.
F. Nonrenewable obligations having not more than 10 months to run consistingof notes or drafts secured by shipping documents, warehouse receipts, orsimilar documents creating a security interest in readily marketable,nonperishable, staple commodities, insured to the extent that insurance iscustomarily required, shall be subject to a sliding scale limitation up to 50percent of such capital, surplus, and undivided profits. The sliding scalelimitation shall require that when the face amount of the obligation exceeds15 percent of such capital and surplus by any number of percentage points upto 35, the market value of the security for the obligation shall exceed theface amount of the obligation by at least the same number of percentagepoints.
G. The Commission shall adopt necessary regulations to require entities thatwould otherwise be treated as separate entities to be treated as related forthe purposes of compelling reporting not more frequently than quarterly, tothe Commission of the aggregate obligations of such parties to the bank. Forthe purposes of this subsection:
1. The Commission may treat as related parties individuals that are in thesame household or that are the parents, grandparents, children, orgrandchildren of each other whether or not in the same household;
2. Any person owning as much as 34 percent of stock of a corporation or beingan officer or director of such corporation may be treated as related to suchcorporation;
3. Any person entitled to a share of the profits and losses of ordistributions from a limited liability company, or who is a manager of amanager-managed limited liability company or a member of a member-managedlimited liability company, may be treated as related to the limited liabilitycompany; and
4. Any person having an interest in income or capital of a partnership may betreated as a related party.
H. All loans made by a bank in excess of 15 percent of its capital andsurplus shall be approved by the board of directors or the executivecommittee of the bank by resolution recorded in the bank's minute book.
I. Notwithstanding the limitations in this section, the Commission may byregulation authorize state banks to make loans to one borrower in suchamounts as may be authorized under any lending limit laws applicable tonational banks.
(Code 1950, § 6-76; 1952, c. 23; 1958, c. 74; 1960, c. 27; 1966, c. 584, §6.1-61; 1970, c. 42; 1977, cc. 110, 466; 1978, c. 683; 1984, c. 134; 1987, c.494; 1994, c. 290; 2002, c. 186; 2006, c. 912; 2010, c. 794.)
§ 6.2-875. (Effective October 1, 2010) Limitations on obligations ofborrowers.
A. As used in this section:
"Installment consumer paper" shall include installment notes of up to 10years' duration for the purchase of unimproved real property.
"Obligation" means the direct liability of the maker or acceptor of thepaper discounted with or sold to a bank and the liability of the endorser,drawer, or guarantor who obtains a loan from or discounts paper with or sellspaper under his guaranty to such bank. "Obligation" shall include:
1. In the case of obligations of a corporation or a limited liabilitycompany, all obligations of all subsidiaries thereof in which the corporationor limited liability company owns or controls a majority interest; and
2. Any liability of the bank under a letter of credit, other than a letter ofcredit arising out of transactions involving the importation or exportationof goods or the domestic shipment of goods, except to the extent (i) the bankhas a binding participation of another bank, organized under the laws of theCommonwealth or another state or the United States, or a written commitmentby another such bank to assume primary liability therefor or (ii) such bankissuing the letter of credit has in its possession money on deposit to thecredit of such customer or securities or assets readily convertible into cashwith which to honor such letter of credit.
B. Subject to the exceptions set forth in subsections D, E, F, and I, thetotal obligations of any person, including, with respect to a partnership, asprovided in subsection C, the partners having a five percent or greaterinterest in either the income or capital of a partnership other than limitedpartners, to any bank shall at no time exceed 15 percent of the sum of thecapital, surplus, and loan loss reserve of such bank.
C. For the purposes of this section:
1. The obligation of partners in the partnership and the partnership shallnot be combined with each other except if (i) the purpose for which theobligation of any partner was incurred or utilized relates to the partnershipor the purposes of the partnership, including acquisition of an interest inthe partnership, such obligation shall be combined with the obligation of thepartnership or (ii) the primary source of repayment of a partner's individualobligation is the partnership or funds therefrom, the obligation of thepartnership shall be combined with the obligation of such partner, other thana limited partner or partner with less than five percent interest, and thelimitation specified herein shall apply to the combined obligations of eachsuch partner and the partnership. Except in the two instances specified inclauses (i) and (ii), the individual liability of the partner shall not betreated as an obligation of the individual, and the obligations of partner asindividual guarantor on partnership obligations shall not be treated as anobligation of the individual for purposes of computation hereunder when, ineither case, the bank has a certificate of a responsible officer, designatedby the board of directors for this purpose, stating that the responsibilityof the partnership for each obligation has been evaluated and the bank isrelying primarily upon such partnership for the payment of such indebtedness;and
2. There may be counted as part of the surplus (i) the undivided profits asof the date of the most recent call statement and (ii) capital notes anddebentures, the issuance of which has been approved by the Commission,outstanding as of said date, and consisting of debt obligations subordinateto all other contractual liabilities of the bank.
D. The following kinds of obligations shall not be subject to any limitation,except as expressly stated in subdivision 20:
1. Obligations in the form of drafts or bills of exchange drawn in good faithagainst actually existing values;
2. Obligations arising out of the discount of commercial or business paperactually owned by the person, partnership, association, limited liabilitycompany, or corporation negotiating the same;
3. Obligations drawn in good faith against actually existing values andsecured by goods or commodities in process of shipment;
4. Obligations in the form of banker's acceptances of other banks of the kinddescribed in section thirteen of the Federal Reserve Act;
5. Obligations of the United States, the Commonwealth, or any politicalsubdivision of the Commonwealth, including sanitary or public facilitiesdistricts;
6. Obligations fully guaranteed or insured by a state or by a state authorityfor the payment of the obligation of which the faith and credit of the stateis pledged;
7. First mortgage real estate loans that are insured by the Federal HousingAdministrator;
8. Obligations guaranteed as to principal and interest by the United States;
9. Loans in which the Small Business Administration or a federal reserve bankhas definitely agreed or committed itself to participate, to the extent ofsuch participation;
10. Obligations guaranteed by the Small Business Administration or FarmersHome Administration, to the extent of such guaranty;
11. Loans that the Federal Commodity Credit Corporation has definitely agreedto purchase;
12. Direct obligations of, and obligations guaranteed by, the Export-ImportBank;
13. Loans guaranteed by a federal guaranteeing agency pursuant to the DefenseProduction Act of 1950;
14. Bonds and notes of the Federal National Mortgage Association;
15. Bonds, debentures, and other similar obligations of Federal Land Banks,Federal Intermediate Credit Banks, or Banks for Cooperatives issues pursuantto acts of Congress;
16. Obligations of the Federal Financing Bank, the Student Loan MarketingAssociation, the Federal Home Loan Mortgage Corporation, the National CreditUnion Administration, Farm Credit Banks, the Government National MortgageAssociation, or the Commodity Credit Corporation;
17. Time deposits in, or obligations issued by, a Federal Home Loan Bank;
18. Repurchase agreements of obligations authorized by this subsection;
19. Obligations of any person, secured by not less than a like amount ofbonds or notes or other evidences of indebtedness of the United States or ofthe Commonwealth;
20. Obligations as endorser or guarantor of installment consumer paper thatcarry a full or limited endorsement or guarantee of the person transferringthe same when the bank has a certificate of a responsible officer, designatedby its board of directors for that purpose, stating that the responsibilityof the maker of such obligation has been evaluated and the bank is relyingprimarily upon such maker for the payment of such obligation. In such casethe limitations of this section as to the obligations of the maker shall bethe sole applicable loan limitation; and
21. Obligations secured by the pledge or assignment of certificates ofdeposit or saving certificates of the lending bank, to the extent of theprincipal amount of such certificates so pledged or assigned.
E. The following kinds of obligations shall be subject to a limitation of 30percent of such capital and surplus:
1. Obligations as endorser or guarantor of notes, other than commercial orbusiness paper excepted under subdivision D 2 having a maturity of not morethan six months, and owned by the person endorsing and negotiating the same;
2. Obligations of any person in the form of notes or drafts secured byshipping documents or instruments (i) transferring or securing title coveringlivestock or (ii) giving a lien on livestock when the market value of thelivestock securing the obligations is not at any time less than 115 percentof the amount by which the obligations exceed 15 percent of such capital andsurplus; and
3. Obligations secured by bonds or notes of the United States, or bonds ofthe Commonwealth or any of its political subdivisions, if the face valuethereof is at least equal to the excess of the obligations over 15 percent ofsuch capital and surplus.
F. Nonrenewable obligations having not more than 10 months to run consistingof notes or drafts secured by shipping documents, warehouse receipts, orsimilar documents creating a security interest in readily marketable,nonperishable, staple commodities, insured to the extent that insurance iscustomarily required, shall be subject to a sliding scale limitation up to 50percent of such capital, surplus, and undivided profits. The sliding scalelimitation shall require that when the face amount of the obligation exceeds15 percent of such capital and surplus by any number of percentage points upto 35, the market value of the security for the obligation shall exceed theface amount of the obligation by at least the same number of percentagepoints.
G. The Commission shall adopt necessary regulations to require entities thatwould otherwise be treated as separate entities to be treated as related forthe purposes of compelling reporting not more frequently than quarterly, tothe Commission of the aggregate obligations of such parties to the bank. Forthe purposes of this subsection:
1. The Commission may treat as related parties individuals that are in thesame household or that are the parents, grandparents, children, orgrandchildren of each other whether or not in the same household;
2. Any person owning as much as 34 percent of stock of a corporation or beingan officer or director of such corporation may be treated as related to suchcorporation;
3. Any person entitled to a share of the profits and losses of ordistributions from a limited liability company, or who is a manager of amanager-managed limited liability company or a member of a member-managedlimited liability company, may be treated as related to the limited liabilitycompany; and
4. Any person having an interest in income or capital of a partnership may betreated as a related party.
H. All loans made by a bank in excess of 15 percent of its capital andsurplus shall be approved by the board of directors or the executivecommittee of the bank by resolution recorded in the bank's minute book.
I. Notwithstanding the limitations in this section, the Commission may byregulation authorize state banks to make loans to one borrower in suchamounts as may be authorized under any lending limit laws applicable tonational banks.
(Code 1950, § 6-76; 1952, c. 23; 1958, c. 74; 1960, c. 27; 1966, c. 584, §6.1-61; 1970, c. 42; 1977, cc. 110, 466; 1978, c. 683; 1984, c. 134; 1987, c.494; 1994, c. 290; 2002, c. 186; 2006, c. 912; 2010, c. 794.)
