Texas Administrative Code › Title 7 - BANKING AND SECURITIES › Part 2 - TEXAS DEPARTMENT OF BANKING › Chapter 12 - LOANS AND INVESTMENTS › Subchapter A - LENDING LIMITS › Section 12.5 - Percentage Lending Limits

Current through Reg. 49, No. 28; July 12, 2024
(a)
				  General lending limit. Generally, a bank's total outstanding loans and
				  extensions of credit to one borrower, as provided in the Finance Code §
										RSA 34.201, may
				  not exceed 25% of the bank's Tier 1 capital. However, certain loans or
				  extensions of credit are subject to special lending limits as set forth in this
				  section. These special lending limits are cumulative of one another and of the
				  general lending limit under this subsection except as otherwise
				  provided.
(b) Loans secured by
				  title to readily marketable goods.
(1)
				  Pursuant to the Finance Code, §
											RSA
				  34.201(a)(3), loans to one
				  borrower secured by a bill of lading, bonded warehouse receipt, or similar
				  document transferring or securing title to readily marketable goods may not
				  exceed 50% of the bank's Tier 1 capital, in addition to the amount for that
				  borrower allowed under the bank's general lending limit for loans and
				  extensions of credit other than as provided by this subsection, provided the
				  bank's interest in the collateral is adequately insured against loss if it is
				  customary to do so. The market value of the goods securing the loan must at all
				  times equal at least 115% of the amount of the outstanding loan that exceeds
				  the general lending limit. The duration of the loan or extension of credit may
				  not exceed six months if secured by goods that are refrigerated or frozen, or
				  ten months if secured by nonperishable goods.
(2) The holder of the bonded warehouse
				  receipts, order bills of lading, documents of title (as defined under the
				  Business and Commerce Code), or other similar documents must have control and
				  be able to obtain immediate possession of the goods so that the bank is able to
				  sell the underlying goods and promptly transfer title to the buyer if default
				  were to occur on a loan secured by such documents. The requirement under
				  applicable law for a brief notice period or other similar procedural condition
				  prior to disposal of the goods will not affect the eligibility of the
				  instruments for this special lending limit.
(3) For purposes of this subsection, readily
				  marketable goods are articles of commerce or industry in the form of fungible
				  units that are easy to sell in a market with sufficiently frequent price
				  quotations, and includes basic metals, such as tin, copper, or lead, consumer
				  goods, and packaged processed foods, including refrigerated or frozen foods.
				  The exact price must be easy to determine and the article itself must be easy
				  to sell at any time at a price that would not be considerably less than the
				  amount at which it is valued as collateral. Whether an article qualifies as
				  readily marketable goods is determined on the basis of the conditions existing
				  at the time the loan or extension of credit secured by the article is made.
				  Whether goods are nonperishable must be determined on a case-by-case basis
				  because of the differences in types of goods and differences in the shipping,
				  handling, and storing of goods.