Reg O - Readily Marketable Collateral

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Question:

Reg O - Individual Lending Limit, what is the definition of the term "readily marketable collateral" in relation to an insider's lending limit (the additional 10% of unimpaired capital and unimpaired surplus)? Is real estate with a valid appraisal considered "readily marketable collateral"?

Answer:

To answer your question, real estate is not considered readily marketable collateral. The OCC provides the common definition of the term "readily marketable collateral" at 12 CFR 32.2(n):

Readily marketable collateral means financial instruments and bullion that are salable under ordinary market conditions with reasonable promptness at a fair market value determined by quotations based upon actual transactions on an auction or similarly available daily bid and ask price market.

Also, if you are a not a nationally chartered bank, you will have to defer to your state laws for the definition of allowable loans to one borrower. A more restrictive state law will trump Reg. O individual lending limits in these cases.

First published on BankersOnline.com 5/14/07
Revised 5/17/07