(a) A loan or extension of credit, within a bank's
legal lending limit when made, will not be considered a violation
of the applicable lending limit but will be cited as nonconforming
if the loan no longer complies with the bank's legal lending limit
because:
(1) the bank's Tier 1 capital has declined;
(2) borrowers have merged or otherwise become affiliated
in such a way as to invoke aggregation under §12.9 of this title
(relating to Aggregation and Attribution);
(3) the bank has merged with another depository institution
or the bank has purchased all or substantially all of the assets of
a failed depository institution from the Federal Deposit Insurance
Corporation as receiver of such institution on or shortly after the
date of its closing;
(4) the lending limit or capital definitions or standards
have changed after the date the loan or extension of credit was originated;
(5) in the case of a credit exposure arising from a
transaction identified in §12.12(a) of this title (relating to
Credit Exposure Arising from Derivative and Securities Financing Transactions)
and measured by the model method specified in §12.12(b)(1)(A)
or (c)(1)(A), the current exposure method specified in §12.12(b)(1)(C),
or the Basel collateral haircut method specified in §12.12(c)(1)(C),
an increase in the credit exposure subject to the lending limits of
Finance Code, §34.201, or this subchapter after execution of
the transaction; or
(6) collateral securing the loan or extension of credit
to satisfy the requirements of a special lending limit or lending
limit exception has declined in value.
(b) A bank must exercise reasonable efforts to bring
a loan or extension of credit that is nonconforming as a result of
circumstances described in subsection (a)(1) - (5) of this section
into conformity with the legal lending limit, consistent with safe
and sound banking practices. As a last resort, a bank may renew or
restructure an existing, nonconforming loan or extension of credit
as a new, nonconforming loan or extension of credit without violating
the Finance Code or this subchapter, unless:
(1) additional funds are advanced by the bank to the
borrower, except as permitted by §12.4(b) of this title (relating
to Loan Commitments);
(2) the original borrower is replaced by a new borrower;
or
(3) the banking commissioner determines that the renewal
or restructuring of the loan or extension of credit is designed to
evade the bank's lending limit.
(c) A bank must bring a loan or extension of credit
that is nonconforming as a result of the circumstance described in
subsection (a)(5) of this section into conformity with the legal lending
limit on or before the 31st day after the nonconformity is discovered
unless judicial proceedings, regulatory action, or other extraordinary
circumstances beyond the bank's control prevent the bank from taking
action.
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Source Note: The provisions of this §12.10 adopted to be effective March 1, 1996, 21 TexReg 1383; amended to be effective September 6, 2007, 32 TexReg 5655; amended to be effective May 10, 2012, 37 TexReg 3395; amended to be effective January 3, 2013, 37 TexReg 10195; amended to be effective November 7, 2013, 38 TexReg 7685 |