Fed Conforming To OCC Rule on Loans to 1 Borrower

WASHINGTON - Hoping to avoid conflicting regulations, the Federal Reserve Board is proposing to alter the method it uses to determine how much a bank can lend to insiders.

The plan will not change the percentage of capital and surplus a bank can lend to officers, directors, and principal shareholders. Those limits will remain at 15% for loans that are not fully collateralized and an additional 10% for loans that are collateralized.

Rather, the Fed wants to change how it calculates capital and surplus. It now will count Tier 1 and Tier 2 capital, and a bank's loan- and lease-loss reserves.

The Fed is copying the calculation the Comptroller recently adopted. The change should not substantially affect the amount banks can lend to single borrowers.

Comments are due by May 22.

The central bank made a second technical change to a regulation earlier this month, clarifying that state member banks can run loan origination offices and back-office facilities without having to call them branches.

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