New Jersey Administrative Code › Title 3 - BANKING › Chapter 11 - INVESTMENTS › Subchapter 7 - LIMITATION OF LIABILITY TO A BANK, SAVINGS BANK OR STATE ASSOCIATION › Section 3:11-7.8 - General lending limitations

Current through Register Vol. 56, No. 14, July 15, 2024
(a) The total
				liabilities, including investment securities, of any person which are not fully
				secured, as determined in a manner consistent with (b) below, by collateral
				having a market value at least equal to the amount of the liability shall not
				exceed 15 percent of the capital funds of a bank. The 10 percent limitations
				prescribed in N.J.S.A. 17:9A-62A and 17:9A-62F are increased pursuant to
				N.J.S.A. 17:9A-62H.
(b) The total
				liabilities of any person secured by readily marketable collateral having a
				market value, as determined by reliable and continuously available price
				quotations, at least equal to the amount of funds outstanding shall not exceed
				10 percent of the capital funds of the bank. This limitation shall be separate
				from and in addition to the limitation contained in (a) above.
(c) A liability based on the limitation
				contained in (b) above shall be secured by readily marketable collateral having
				a current market value of at least 100 percent of the amount of the loan or
				extension of credit at all times. "Current market value" means the bid or
				closing price listed for an item in a regularly published listing or an
				electronic reporting service.
(d)
				For purposes of this section, "readily marketable collateral" means financial
				instruments and bullion which are salable under ordinary circumstances with
				reasonable promptness at a fair market value determined by quotations based on
				actual transactions on an auction or a similarly available daily bid and ask
				price market. "Financial instruments" include stocks, notes, bonds, and
				debentures traded on a national securities exchange, "OTC margin stocks" (as
				defined in Regulation U of the Federal Reserve Board), negotiable certificates
				of deposit, commercial paper, bankers' acceptances and shares in money market
				and mutual funds of the type which issues shares in which banks may perfect a
				security interest.
(e) Financial
				instruments may be denominated in foreign currencies which are freely
				convertible to United States dollars. If collateral is denominated and payable
				in a currency other than that of the loan or extension of credit which it
				secures, the collateral must be revalued at least monthly, using appropriate
				foreign exchange rates, in addition to being repriced at current market
				value.
(f) Each bank must institute
				adequate procedures to ensure that the collateral value fully secures the
				outstanding loan at all times. If collateral values fall below 100 percent of
				the outstanding loan, to the extent that the loan is no longer in conformance
				with this section and exceeds the general 15 percent limitation, the loan must
				be brought into conformance within five business days, except where judicial
				proceedings, regulatory actions or other extraordinary occurrences prevent the
				bank from taking action.
(g) The
				total liabilities of any person secured by a segregated deposit account in the
				lending bank shall not be subject to any limitation based on the capital funds
				of the bank.