Sec. 223.15 May a member bank purchase a low-quality asset from an affiliate?
(a) In general. A member bank may not purchase a low-quality asset from an affiliate
unless, pursuant to an independent credit evaluation, the member bank had committed itself to
purchase the asset before the time the asset was acquired by the affiliate.
(b) Exemption for renewals of loan participations involving problem loans. The
prohibition contained in paragraph (a) of this section does not apply to the renewal of, or
extension of additional credit with respect to, a member bank’s participation in a loan to a
nonaffiliate that was originated by an affiliate if:
(1) The loan was not a low-quality asset at the time the member bank purchased its
participation;
(2) The renewal or extension of additional credit is approved, as necessary to protect
the participating member bank’s investment by enhancing the ultimate collection of the
original indebtedness, by the board of directors of the participating member bank or, if the
originating affiliate is a depository institution, by:
(i) An executive committee of the board of directors of the participating member bank;
or
(ii) One or more senior management officials of the participating member bank, if:
(A) The board of directors of the member bank approves standards for the member
bank’s renewals or extensions of additional credit described in this paragraph (b), based on the
determination set forth in paragraph (b)(2) of this section;
(B) Each renewal or extension of additional credit described in this paragraph (b) meets
the standards; and
(C) The board of directors of the member bank periodically reviews renewals and
extensions of additional credit described in this paragraph (b) to ensure that they meet the
standards and periodically reviews the standards to ensure that they continue to meet the
criterion set forth in paragraph (b)(2) of this section;
(3) The participating member bank’s share of the renewal or extension of additional
credit does not exceed its proportional share of the original transaction by more than 5 percent,
unless the member bank obtains the prior written approval of its appropriate Federal banking
agency; and
(4) The participating member bank provides its appropriate Federal banking agency
with written notice of the renewal or extension of additional credit not later than 20 days after
consummation.
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