Reg On Using IRA As Additional Collateral

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Question:

I have a customer who wants to use his IRA account (elsewhere) as additional collateral since his appraisal was not sufficient for the amount requested. I know that we can not use the IRA as additional collateral. I see in the IRS PUB560 the notation but my question is ...Is there a regulation that relates to this situation?

Answer:

I know that I'm not understanding the question, but will simply state that the prohibition against using the IRA as collateral is in the Internal Revenue Code (IRC); i.e. IRS regulations and you can read about it in IRS Publication 590.

If you are looking for an additional regulation specific to banking there is none simply because none is needed. The IRC controls the situation.

Frankly, I've always thought the IRS' flat prohibition was overkill. The participant has no control over his IRA; i.e. the actual assets are held by either a custodian or a trustee and the participant would have no power to pledge them even if it wasn't a prohibited transaction.

Any time your bank spends on considering this is simply time wasted...