Loan And Investment Limitations - Loans And Investments - Financial - CA

Section § 1470

This section explains terms related to financial relationships and investments. It defines an 'affiliate' as any person or entity that is controlled by, controls, or is under common control with a specified person, either directly or indirectly through intermediaries. 'Control' is defined elsewhere in Section 1250. A 'regulated corporation' includes any corporation or similar entity in which a bank has invested and has control. 'Securities issued by a person' consist of any financial instruments, such as debt or equity, that are issued by a person or their affiliates for their benefit.

(a) In this article and in Article 4 (commencing with Section 1710) of Chapter 19, “affiliate,” when used with respect to a specified person, means any person controlling, controlled by, or under common control with, the specified person, directly or indirectly, through one or more intermediaries.

(b) “Control” has the meaning set forth in Section 1250.

(c) “Regulated corporation” means any corporation or limited liability company or similar entity in which a bank makes an equity investment and which the bank controls.

(d) “Securities issued by a person” means any debt, equity, or other security issued by a person, and any and all affiliates of that person, issued for the benefit of that person or for the benefit of an affiliate of that person.

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Section § 1471

This law allows banks to hold both debts and securities from the same person, as long as certain conditions are met. However, the total value of these obligations and securities must not be more than 25% of the bank's equity and related financial reserves. Exceptions and limitations to this rule can be found in other sections mentioned.

(a) Subject to the limitations and exceptions in Sections 1481 and 1510, a bank may hold both obligations made by a person, and securities issued by that same person.

(b) The total amount of obligations and securities held by a bank pursuant to subdivision (a) shall not exceed 25 percent of the sum of the shareholders’ equity, allowance for loan and lease losses, capital notes and debentures of the bank.

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Section § 1472

This law allows banks to make loans to, and invest in the securities of, their regulated corporations without the usual restrictions found in other sections. However, these actions need prior approval from the commissioner, who might set specific limits.

Subject to prior approval by the commissioner and to any limitations the commissioner may impose, the limitations in Sections 1471, 1481, and 1510 shall not apply to loans made by a bank to, and the bank’s investments in securities of, its regulated corporations.

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Section § 1473

This law states that rules outlined in Sections 1481 and 1510 do not affect investment holdings by banks from before January 1, 2009. Additionally, any investment authorizations granted by the commissioner before this date are no longer valid.

Sections 1481 and 1510 shall not apply to investments held by a bank prior to January 1, 2009. All authorizations regarding investments by a bank issued by the commissioner prior to January 1, 2009, are terminated.

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