Loan to related interest of principal shareholder - she owns 73% of the related interest. The loan is for $600,000.
The "other bank debt" rule for $100,000 is stumping me. We have other loans to related interests she has (all CD secured) that total over $100,000. All done before my time.
Does the fact that all the other loans are CD secured exempt it from the more restrictive lending limit?
Please help.
Posted By: Ted Dreyer
Re: REG O - 09/22/10 07:29 PM
The rule of 215.5 limiting "other purpose" loans to $100,000 only applies to executive officers, not to principal shareholders.
So, to be sure i understand (i hate reg O) - the principal shareholder is designated as an executive officer, therfore, the limits apply.
Dan - you are pointing me to the above cite which discusses "general lending limits" - not the more restrictive lending limit. Are the exceptions also exempt from the "more restrictive lending limits" So, if it's a CD secured loan - it would be exempt from the more restrictive lending limits - or am i misunderstanding?
Posted By: rlcarey
Re: REG O - 09/23/10 12:48 AM
215.5(c) A member bank is authorized to extend credit to any executive officer of the bank:
(3) In any amount, if the extension of credit is secured in a manner described in Sec. 215.4(d)(3)(i)(A) through (d)(3)(i)(C) of this part.
Sec. 215.4(d)(3)(i)(C)Extensions of credit secured by a perfected security interest in a segregated deposit account in the lending bank;
So, the CD secured loans are not an issue. You didn't say how the new loan would be secured. If not under one of the exclusion, that loan will be a problem.
Thank you so much!!!
It will be secured by a CD.