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#130865 - 11/14/03 06:36 PM
Bank stock as collateral
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Anonymous
Unregistered
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I really need some information on lending using the bank's stock. Where are regulatory cites regarding any prohibitons on lending using your bank's stock as collateral for a FDIC bank? Or is it just state laws that conrol this? I cannot find any information on this in the FDIC regulations. Your help would be greatly appreciated. Also, is there any difference if it's the holding company stock?
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#130866 - 11/17/03 05:58 PM
Re: Bank stock as collateral
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Power Poster
Joined: Apr 2001
Posts: 4,828
Between the lines
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This doesn't really answer your questions, but since no one else has taken a stab at it; I will give you the best I have. As a national bank, we are prohibited from taking our own stock (which is publicly traded) as collateral. You are on the right track in my opinion. It just doesn't make good sense to use the bank's own capital to secure a customer's loan.
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#130867 - 11/17/03 07:01 PM
Re: Bank stock as collateral
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Anonymous
Unregistered
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Well, I can't cite anything for you, but we are a State, Non-member, FDIC regulated bank and we do this all of the time. We have loans funds to purchase our stock, secured by the same stock, as well as funds for other purposes secured by our stock. We have never been criticized by our State or FDIC examiners for this practice. Hope that helps!
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#130868 - 11/18/03 12:15 AM
Re: Bank stock as collateral
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10K Club
Joined: Jul 2001
Posts: 84,334
Galveston, TX
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It's a state law issue. Most state laws prohibit it. Many do allow loans against a holding company stock, but keep in mind that such a transaction would also constitute a 23A transaction.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#130869 - 11/18/03 04:48 PM
Re: Bank stock as collateral
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Power Poster
Joined: Oct 2003
Posts: 2,548
Southeast
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Take a look at 12 U.S.C. 1828(v)
12 U.S.C. 1828(v) Loans by insured institutions on their own stock
(1) General prohibition No insured depository institution may make any loan or discount on the security of the shares of its own capital stock.
(2) Exclusion For purposes of this subsection, an insured depository institution shall not be deemed to be making a loan or discount on the security of the shares of its own capital stock if it acquires the stock to prevent loss upon a debt previously contracted for in good faith.
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#130871 - 11/04/04 02:28 PM
Re: Bank stock as collateral
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Anonymous
Unregistered
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Where can I find 12 U.S.C. 1828(v)
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#130872 - 11/04/04 02:41 PM
Re: Bank stock as collateral
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10K Club
Joined: Aug 2002
Posts: 47,673
Bloomington, IN
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You can do a Google search using that term, or you can go here .
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The opinions expressed are mine and they are not to be taken as legal advice.
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#130873 - 11/04/04 02:41 PM
Re: Bank stock as collateral
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10K Club
Joined: Jul 2001
Posts: 84,334
Galveston, TX
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#130875 - 05/11/05 10:39 PM
Re: Bank stock as collateral
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Diamond Poster
Joined: Feb 2002
Posts: 1,466
USA
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***BUMP***
Would "its own capital stock" mean the bank's stock itself, not stock of the holding company?
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#2106655 - 11/09/16 05:31 PM
Re: Bank stock as collateral
Kathleen O. Blanchard
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Platinum Poster
Joined: Mar 2006
Posts: 771
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We have a lender taking bank stock as collateral for a loan. But, is the statement below meaning that the lender can only take the stock if he/she feels there will be a loss on a loan that is currently on our books?
(v) LOANS BY INSURED INSTITUTIONS ON THEIR OWN STOCK.--
(1) GENERAL PROHIBITION.--No insured depository institution may make any loan or discount on the security of the shares of its own capital stock.
(2) EXCLUSION.--For purposes of this subsection, an insured depository institution shall not be deemed to be making a loan or discount on the security of the shares of its own capital stock if it acquires the stock to prevent loss upon a debt previously contracted for in good faith.
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#2106656 - 11/09/16 05:35 PM
Re: Bank stock as collateral
Anonymous
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10K Club
Joined: Jul 2001
Posts: 84,334
Galveston, TX
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Yes.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#2106657 - 11/09/16 05:47 PM
Re: Bank stock as collateral
rlcarey
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Platinum Poster
Joined: Mar 2006
Posts: 771
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Is there any State ruling that would override this or would that be for margin stock?
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#2106738 - 11/09/16 08:47 PM
Re: Bank stock as collateral
Anonymous
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10K Club
Joined: Jul 2001
Posts: 84,334
Galveston, TX
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State law cannot trump Federal law. Federal law allows you to loan against Holding Company stock. Some State laws prohibit even that.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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