North Carolina Administrative Code › Title 04 - COMMERCE › Chapter 03 - BANKING COMMISSION › Subchapter C - BANKS › Section .1000 - LOAN ADMINISTRATION AND LEASING › Section 03C .1002 - LEASING OF PERSONAL PROPERTY

Current through Register Vol. 39, No. 2, July 15, 2024
Each bank acquiring and leasing personal property or,
					 acquiring personal property that is subject to an existing lease together with
					 the lessor's interest therein and incurring such additional obligations as may
					 be incident to becoming an owner and lessor of such property, may do so only
					 when subject to the following restrictions:
(1) Before the acquisition, upon the specific
				  request and for the use of the customer, the prospective lessee shall execute
				  an agreement to lease such property;
(2) During the minimum period of the lease,
				  the terms of the lease shall require payment to the bank by the lessee of
				  rentals that, in the aggregate shall exceed the total expenditures by the bank
				  for or in connection with the ownership, maintenance, and protection of the
				  property. In determining the total expenditures under this Rule, a bank may
				  deduct a realistic residual value in determining the rentals to be charged
				  during the term of a lease agreement. Any unguaranteed portion of the estimated
				  residual value relied upon by the bank to calculate total expenditures under
				  this Rule may not exceed 25 percent of the original cost of the property to the
				  lessor. The amount of any estimated residual value guaranteed by a
				  manufacturer, the lessee, or a third party that is not an affiliate of the bank
				  may exceed 25 percent of the original cost of the property where the bank
				  determines and provides supporting documentation that the guarantor has the
				  resources to meet the guarantee;
(3) The total leasing obligations or rentals
				  to any bank of any person, partnership, association, corporation, or limited
				  liability company shall at no time exceed the legal limit permitted by
				  G.S.
				  53C-6-1;
(4) The overall investment of the bank in
				  such property leased to all lessees shall at no time exceed 200 percent of its
				  capital;
(5) The bank shall at all
				  times maintain protection by way of insurance or indemnity provided by the
				  lessee;
(6) No lease or other
				  agreement shall obligate the bank to maintain, repair, or service personal
				  property in connection with any lease held by it;
(7) No personal property acquired pursuant to
				  the ownership or lease of personal property shall be included in the computable
				  investment in fixed assets under
				  G.S.
				  53C-5-2;
(8) Rental payments collected by the bank
				  under lease arrangements shall be rent and shall not be deemed to be interest
				  or compensation for the use of money loaned;
(9) Upon expiration of any lease, whether by
				  virtue of the lease agreement or by virtue of the retaking of possession by the
				  bank, such personal property shall be re-let, sold, otherwise disposed of, or
				  charged off within one year from the time of expiration of such lease;
				  and
(10) Upon written request, the
				  Commissioner of Banks may waive or modify any of the foregoing restrictions. In
				  evaluating such a request, the Commissioner of Banks shall consider the
				  following factors:
(a) the bank's size,
				  profitability, capital sufficiency, risk profile, market, and operational
				  capabilities, especially with a view towards the bank's involvement in lease
				  financing;
(b) current best
				  practices of financial institutions engaged in lease financing;
(c) the nature, size, duration, aggregate
				  amount, and other risks attendant to the bank's lease financing transactions;
				  and
(d) the risk of significant
				  loss to the bank if the Commissioner of Banks does not grant the
				  request.