Iowa Banking Law Blog
Changes in Iowa law affecting banks
Aug. 19, 2011 – Howard O. Hagen, Iowa Banking Law Blog
Below is a very brief summary of changes in the 2011 legislative session that could affect Iowa banks:
Loans to Borrowing Groups
With respect to borrowing groups, banks must document a borrowing entity’s current ownership, the persons who have voting rights with respect to the entity, the names of the entity’s senior management, and the entity’s means of servicing the loan—including the specific reasons that support such assessment. In addition, loan files must contain financials, present and projected economic and financial performance, and the significance of financial support from borrowing group members and third parties.
The Superintendent of Banking is given the authority to approve a loan limit of up to 50% of aggregate capital if all the loans to any one borrower with a borrowing group otherwise meet the requirements of the 25% and 35% loan limit provisions, and the financial strength of any one group member is not relied upon as a basis for loans to any other group member.
With regard to renewals or loan restructurings, if a bank has made reasonable efforts to bring a loan into compliance, consistent with safe and sound banking practices, the loan will be exempted from the lending limits. However, such exemption will not be available if new funds are advanced, a new borrower replaces the original borrower, or the Superintendent concludes that the renewal or restructuring was done to evade lending limits.
Loan and Deposit Production Offices
As with all new legislation, the Iowa Division of Banking may be consulted regarding specific questions or issues; in this case, particularly regarding the new borrowing group language.
Tags: 2011 Iowa legislative session, Iowa bank recordkeeping requirements, Iowa banking law, Iowa Division of Banking, Iowa Superintendent of Banking, loan and deposit production offices, loans to borrowing groups
Industry Categories: Banks & Financial Institutions