A rating of 2 is good, with minor problems. A rating of 3 signifies a bank has trouble in that particular area and will usually cause authorities to take action against the bank to remedy the problem. A rating of 4 signifies more trouble and usually triggers more serious corrective action. A rating of 5 is reserved for banks with a very high possibility of imminent failure and usually will trigger a search for candidates with which to merge the troubled bank. Limits Placed upon Bank Loans Both federal and state laws control the interest rates that banks can charge to borrowers.
Regulations provide a range of permissible interest rates.
A bank is free to charge different borrowers different rates within those ranges depending upon the bank's perception of each business' ability to pay back the loan, the cost of funds the bank pays its depositors, and the competitive pressures of the financial marketplace. Federal and state laws also set lending limits on the amount that can be lent to a particular individual or business. These lending limits are determined primarily by the bank's capital assets. Both federal and state laws place a variety of restrictions on what a bank can do with its own funds. These rules are extremely complex and only an experienced professional can adequately advise bank management.