Comptroller Revises Lending Limit Rules

     WASHINGTON (CN) – Banks have to include the value of their exposure to derivative transactions with prospective borrowers when calculating loan limits, under interim rules adopted by the Office of the Comptroller of the Currency.



     The Dodd-Frank Wall Street Reform and Consumer Protection Act expanded the definition of “loans and extensions of credit” in loan limit rules to include derivative transactions, repurchase agreements, reverse repurchase agreements, securities lending transactions, or securities borrowing transactions between the bank and the borrower.
     Previously, banks could be exposed not just to the risk of default on a loan or line of credit, but also to any derivatives positions held by a borrower.
     The limits on the amount of a loan or extension of credit a bank may make are not changed by the rules. Current regulations limit the amounts to 15 percent of the bank’s capital if the loan is unsecured, or up to 25 for secured loans.
     The rules also consolidate the OCC’s lending limit rules for national banks and federal savings associations into one set of regulations. The two sets of regulations were an artifact of when federal savings associations were regulated by the now defunct Office of Thrift Supervision.
     Although the rules go into effect immediately, the OCC will accept comments on the interim rules until Aug. 6 for use in crafting final rules.

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