Definitions in the Finance Code, Title 3, Subtitles A and G,
are incorporated herein by reference. As used in this subchapter and
in Finance Code, Chapter 34, concerning investments and loans, the
following words and terms shall have the following meanings, unless
the context clearly indicates otherwise.
(1) Borrower--A person who is named as a borrower,
obligor, or debtor in a loan or extension of credit; a person to whom
a state bank has credit exposure arising from a derivative transaction
or a securities financing transaction, entered by the bank; or any
other person, including but not limited to a drawer, endorser, or
guarantor who is considered to be a borrower under the direct benefit,
source of repayment, or common enterprise tests set forth in §12.9
of this title (relating to Aggregation and Attribution).
(2) Call report--The federal Consolidated Report of
Condition and Income required by and filed under 12 U.S.C. §1817
(or under 12 U.S.C. §324 in the case of a bank that is a member
of the Federal Reserve System), or a report of financial condition
and results of operations of a state bank required by the banking
commissioner under Finance Code, §31.108.
(3) Control--Control is presumed to exist when a person
directly or indirectly, or acting through or together with one or
more persons:
(A) owns, controls, or has the power to vote 25 percent
or more of any class of voting securities of another person;
(B) controls, in any manner, the election of a majority
of the directors, trustees, or other persons exercising similar functions
of another person; or
(C) has the power to exercise a controlling influence
over the management or policies of another person.
(4) Credit derivative--As defined in 12 C.F.R. §324.2
(or 12 C.F.R. §217.2 in the case of a bank that is a member of
the Federal Reserve System).
(5) Derivative transaction--Includes any transaction
that is a contract, agreement, swap, warrant, note, or option that
is based, in whole or in part, on the value of, any interest in, or
any quantitative measure or the occurrence of any event relating to,
one or more commodities, securities, currencies, interest or other
rates, indices, or other assets.
(6) Effective margining arrangement--A master legal
agreement governing derivative transactions between a bank and a counterparty
that requires the counterparty to post, on a daily basis, variation
margin to fully collateralize that amount of the bank's net credit
exposure to the counterparty that exceeds $25 million created by the
derivative transactions covered by the agreement.
(7) Eligible credit derivative--A single-name credit
derivative or a standard, non-tranched index credit derivative provided
that:
(A) the derivative contract meets the requirements
of an eligible guarantee, as defined in 12 C.F.R. §324.2 (or
12 C.F.R. §217.2 in the case of a bank that is a member of the
Federal Reserve System), and has been confirmed by the protection
purchaser and the protection provider;
(B) any assignment of the derivative contract has been
confirmed by all relevant parties;
(C) if the credit derivative is a credit default swap,
the derivative contract includes the following credit events:
(i) failure to pay any amount due under the terms of
the reference exposure, subject to any applicable minimal payment
threshold that is consistent with standard market practice and with
a grace period that is closely in line with the grace period of the
reference exposure; and
(ii) bankruptcy, insolvency, restructuring (for obligors
not subject to bankruptcy or insolvency), or inability of the obligor
on the reference exposure to pay its debts, or its failure or admission
in writing of its inability generally to pay its debts as they become
due, and similar events;
(D) the terms and conditions dictating the manner in
which the derivative contract is to be settled are incorporated into
the contract;
(E) if the derivative contract allows for cash settlement,
the contract incorporates a robust valuation process to estimate loss
with respect to the derivative reliably and specifies a reasonable
period for obtaining post-credit event valuations of the reference
exposure;
(F) if the derivative contract requires the protection
purchaser to transfer an exposure to the protection provider at settlement,
the terms of at least one of the exposures that is permitted to be
transferred under the contract provides that any required consent
to transfer may not be unreasonably withheld; and
(G) if the credit derivative is a credit default swap,
the derivative contract clearly identifies the parties responsible
for determining whether a credit event has occurred, specifies that
this determination is not the sole responsibility of the protection
provider, and gives the protection purchaser the right to notify the
protection provider of the occurrence of a credit event.
(8) Eligible protection provider--An entity that is:
(A) a sovereign entity (a central government, including
the U.S. government; an agency; department; ministry; or central bank);
(B) the Bank for International Settlements, the International
Monetary Fund, the European Central Bank, the European Commission,
or a multilateral development bank;
(C) a Federal Home Loan Bank;
(D) the Federal Agricultural Mortgage Corporation;
(E) a depository institution, as defined in section
3 of the Federal Deposit Insurance Act, 12 U.S.C. §1813(c);
(F) a bank holding company, as defined in section 2
of the Bank Holding Company Act, as amended, 12 U.S.C. §1841;
(G) a savings and loan holding company, as defined
in section 10 of the Home Owners' Loan Act, 12 U.S.C. §1467a;
(H) a securities broker or dealer registered with the
SEC under the Securities Exchange Act of 1934, 15 U.S.C. §§78o
et seq.;
(I) an insurance company that is subject to the supervision
of a State insurance regulator;
(J) a foreign banking organization;
(K) a non-U.S.-based securities firm or a non-U.S.-based
insurance company that is subject to consolidated supervision and
regulation comparable to that imposed on U.S. depository institutions,
securities broker-dealers, or insurance companies; or
(L) a qualifying central counterparty.
(9) Qualifying central counterparty--As defined in
12 C.F.R. §324.2 (or 12 C.F.R. §217.2 in the case of a bank
that is a member of the Federal Reserve System).
(10) Qualifying master netting agreement--As defined
in 12 C.F.R. §324.2 (or 12 C.F.R. §217.2 in the case of
a bank that is a member of the Federal Reserve System).
(11) Sale of federal funds--A transaction between depository
institutions involving the transfer of immediately available funds
resulting from credits to deposit balances at Federal Reserve Banks,
or from credits to new or existing deposit balances due from a correspondent
depository institution.
(12) Securities financing transaction--A repurchase
agreement, reverse repurchase agreement, securities lending transaction,
or securities borrowing transaction.
(13) Tier 1 capital--A state bank's unimpaired capital
and surplus. A state bank's Tier 1 capital is calculated under 12
C.F.R. part 324 (or 12 C.F.R. part 217 in the case of a bank that
is a member of the Federal Reserve System), is reported in the bank's
most recent call report, and is periodically re-calculated as provided
by §12.11 of this title (relating to Calculation of Lending Limit).
(14) Unimpaired capital and surplus--A state bank's
core capital, equal to its Tier 1 capital calculated under 12 C.F.R.
part 324 (or 12 C.F.R. part 217 in the case of a bank that is a member
of the Federal Reserve System), and referred to as Tier 1 capital
in this chapter.
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