Texas Register, Volume 48, Number 45, Pages 6497-6654, November 10, 2023 Page: 6,511
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12.3. Loans and Extensions of Credit.
(a) (No change.)
(b) Loans or extensions of credit for purposes of the Finance
Code, 34.201, and this subchapter do not include:
(1) funds advanced to or for the benefit of a borrower by a
bank for taxes or insurance associated with collateral security for a loan
or extension of credit, as well as funds advanced for utilities, security,
and maintenance expenses associated with real property securing a loan
or extension of credit, but only if necessary to preserve the value of
the real property or other collateral security and consistent with safe
and sound banking practices, provided the bank maintains sufficient
records to demonstrate the necessity of the advance, and such advances
are included in loans and extensions of credit thereafter until repaid for
the purpose of determining whether additional loans or extensions of
credit to the same borrower may be made within applicable lending
limits;
(2) accrued and discounted interest on an existing loan or
extension of credit, including interest that has been capitalized from
prior notes and interest that has been advanced under terms and condi-
tions of a loan agreement;
(3) that portion of a loan or extension of credit sold as a par-
ticipation by a bank on a nonrecourse basis, provided the participation
results in a pro rata sharing of credit risk proportionate to respective
interests of the originating and participating lenders, except that:
(A) notwithstanding any requirement of Financial Ac-
counting Standard Board Accounting Standard Codification Topic 860,
Transfers and Servicing [Statement of Finaniat Accuntin gStan ards
No 466(inaneiatAeeonmting StandardsBA 2099)], for lending limit
purposes, if the participation agreement provides that repayment must
be applied first to the portions sold, a pro rata sharing will be considered
to exist only if, in the event of default or comparable event provided in
the agreement, the participants share in all subsequent repayments and
collections in proportion to their actual percentage participation at the
time of the occurrence of the event;
(B) if the originating bank funds the entire loan, the par-
ticipants must be contractually obligated to remit their portion to the
bank before the close of business (the time at which the bank closes its
accounting records for the business day) on the next business day of
the originating bank or its portion funded by the originating bank will
be considered a loan by the originating bank to the borrower;
(C) in the case of a participation sold in an existing loan,
the amount of the participation may not be subtracted from the out-
standing loans and extensions of credit of the originating bank until the
proceeds of sale are in the possession of the originating bank; and
(D) a loan participation agreement that provides for
weekly settlement of amounts due to and from the participants meetsthe requirements of this paragraph if the outstanding balance to the
borrower from the originating bank does not at any time exceed the
bank's legal lending limit;
(4) an advance against uncollected funds in the normal
course of collection pursuant to the bank's availability schedule
issued in compliance with Regulation CC (12 C.F.R. 229.1 et seq.),
including the amount of an item that must be credited to the customer
under the bank's availability schedule but remains uncollected and
unreturned because of a delay or defect in the collection system;
(5) the sale of Federal funds with a maturity of one day or
less, or Federal funds sold under a continuing contract, including con-
tracts that provide for weekly settlement if the parties have the contrac-
tual right to obtain their funds at maturity of each transaction;(6) intra-day credit exposures arising from a derivative
transaction or a securities financing transaction;
(7) a renewal or restructuring of a nonconforming loan as a
new loan or extension of credit, subject to compliance with 12.10(b)
of this title (relating to Nonconforming Loans); and
(8) that portion of one or more loans or extensions of credit,
not to exceed 15% of the bank's Tier 1 capital, with respect to which
the bank has purchased protection in the form of a single-name eligible
credit derivative [that meets the requirements of -1-22(a)(-) of this ti-
tle (-elating to Defnitions)] from an eligible protection provider if the
reference obligor is the same legal entity as the borrower in the loan or
extension of credit and the maturity of the protection purchased equals
or exceeds the maturity of the loan or extension of credit.
12.6. Loans Not Subject to Lending Limits.
(a) - (e) (No change.)
(f) Government guaranteed loans. Pursuant to Finance Code,
34.201(a)(8), a loan or extension of credit to a borrower is not subject
to the limitations of the Finance Code, 34.201, or this subchapter to
the extent secured by unconditional takeout commitments, insurance,
or guarantees of a governmental entity described in subsection (c) or (e)
of this section, provided the commitment or guarantee is payable only
in cash or its equivalent. If the purchasing, insuring, or guaranteeing
entity is described in subsection (c) of this section, the lending bank
must obtain an opinion of counsel [or the opinion of the attorney gen-
eral] that the unconditional takeout commitment, insurance, or guar-
antee is a valid and enforceable general obligation of the purchasing,
insuring, or guaranteeing entity. A takeout commitment, insurance,
or guarantee is considered unconditional if the protection afforded the
bank is not substantially diminished or impaired if loss should result
from factors beyond the bank's control. Protection against loss is not
materially diminished or impaired by procedural requirements such as
an agreement to pay on the obligation only in the event of default, in-
cluding default over a specific period of time, a requirement that notifi-
cation of default be given within a specific period after its occurrence,
or a requirement of good faith on the part of the bank.
(g) Loans secured by segregated deposit accounts. Pursuant
to the Finance Code, 34.201(a)(10), loans or extensions of credit are
not subject to the limitations of the Finance Code, 34.201, and this
subchapter to the extent secured by a segregated deposit account in the
lending bank, provided that:
(1) the lending bank has perfected its security interest in
the deposit under applicable law;
(2) if the deposit is eligible for withdrawal before the se-
cured loan matures, the bank establishes internal procedures to prevent
release of the security without the lending bank's prior consent; and
(3) if the deposit is denominated and payable in a currencyother than that of the loan or extension of credit that it secures, the
deposit currency is freely convertible to U.S. dollars, except that only
that portion of the loan or extension of credit that is fully secured by
the U.S. dollar value of the deposit qualifies for exception and only if
the lending bank establishes procedures to periodically revalue foreign
currency deposits to ensure that the loan or extension of credit remains
fully secured at all times.
(h) Discount of installment consumer paper.
(1) Loans and extensions of credit to one borrower arising
from the discount of negotiable or nonnegotiable installment consumer
paper that carries a full recourse endorsement or unconditional guar-
antee of payment by the person transferring the paper to the bank is
considered a loan or extension of credit to the transferor, as well as thePROPOSED RULES November 10, 2023 48 TexReg 6511
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Texas. Secretary of State. Texas Register, Volume 48, Number 45, Pages 6497-6654, November 10, 2023, periodical, November 10, 2023; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth1628491/m1/15/: accessed July 17, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.