Ga. Comp. R. & Regs. R. 80-1-5-.04 - Participation Loans
(1)
That portion of a loan which is sold by the originating bank to another bank
must conform to all laws and regulations applicable to that category of loan to
the same extent as if the purchasing bank had itself originated the loan; i.e.,
collateral documentation, maturity, loan-to-collateral value ratio, maximum
loan limits, etc. The purchasing bank shall obtain from the selling bank copies
of all pertinent documents or a summary of sufficient information therefrom to
allow that bank to conclude that all legal and regulatory requirements have
been met and that the loan may be legally carried upon its books.
(2) Participation in Pools of Loans or
Discount Lines:
(a) Loans contained in the
pool or discount line must be physically marked or specifically identified on
the selling bank's records.
(b) The
participation agreement must call for the participant to share pro rata in
losses experienced by the pool or discount line.
(c) The participation agreement must provide
for periodic, at least quarterly, reports by the seller to the purchaser as
settlement for losses incurred and providing past due status of loans contained
in the pool or discount line.
(d)
Where the participation purchased is in excess of fifteen (15) percent of the
purchasing bank's statutory capital base, the participation must have the prior
written approval of the bank's Board of Directors or Loan
Committee.
(3) Where
there exist agreements to repurchase or loss indemnity agreements between the
selling and purchasing banks, participations shall be treated as loans to the
selling bank by the purchasing bank and the amount of the participation shall
be considered to be remaining on the selling bank's books for purposes of legal
limitations.
(4) The portion of a
loan or extension of credit sold as a participation on a nonrecourse basis
shall not constitute a loan or extension of credit for purposes of O.C.G.A. ยง
7-1-285, provided that the
participation results in a pro rata sharing of credit risk proportionate to the
respective interests of the originating and participating lenders. Where a
participation agreement provides that repayment must be applied first to the
portions sold, a pro rata sharing will be deemed to exist only if the agreement
also provides that, in the event of default or comparable event defined in the
agreement, participants must share in all subsequent repayments and collections
in proportion to their percentage participation at the time of the occurrence
of the event.
Notes
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