The Office of the Comptroller of the Currency is proposing to make it easier for national banks to protect their collateral by extending additional credit to borrowers.

Under a proposal published in today's Federal Register, the agency would allow a national bank to exceed its limit on loans to a single borrower, provided two conditions are met.

First, the new loan must be secured by either personal property or real estate. Second, the banks must be able to prove that they are better off extending additional credit than foreclosing on the collateral.

Currently, banks can exceed the lending limit only if the loan is secured by real estate.

"Advancing funds for the purpose of preserving the condition of equipment or getting perishable crops to market may protect the bank's condition more effectively than waiting until after foreclosure," the OCC wrote in the proposal.

The OCC also wants to clarify when banks must recalculate their lending limits. A national bank must base its lending limit on capital and surplus levels as of the end of the most recent quarter, according to the proposal.

Comments are due Sept. 16.

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