§412:9-404 Limitations on loans and extensions of credit to one borrower. (a) No depository financial services loan company shall permit a person to become indebted or liable to it, either directly or indirectly, on loans and extensions of credit, including any credit exposure arising out of derivative transactions entered into by a depository financial services loan company and its subsidiaries, in a total amount outstanding at any one time in excess of twenty per cent of the depository financial services loan company's capital and surplus; provided that such aggregate amount may be increased to one hundred per cent of the depository financial services loan company's capital and surplus if the loans and extensions of credit made to the person in excess of twenty per cent of the depository financial services loan company's capital and surplus are fully secured by real property as provided in section 412:9-405.

(b) As used in this section, a "derivative transaction" includes any transaction that is a contract, agreement, swap, warrant, note, or option that is based, in whole or in part, on the value of, any interest in, any quantitative measure of, or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets.

(c) The limitations set forth in this section shall not apply to:

(1) Loans and extensions of credit to the extent secured by a pledge or security interest in a deposit account in the lending depository financial services loan company; and

(2) Loans and extensions of credit secured by the interest-bearing obligations of the United States or those for which the faith and credit of the United States are distinctly pledged to provide for the payment of principal and interest thereof or of the State or any county or municipal or political subdivision of this State, issued in compliance with the laws of this State, where the market value of the security shall be at any time not less than one hundred five per cent of the face amount of the loans and extensions of credit.

(d) In computing the total loans and extensions of credit made by a depository financial services loan company to any person, all loans and extensions of credit by the depository financial services loan company to the person and to any partnership, joint venture, or unincorporated association of which the person is a partner or a member and all credit exposure arising from a derivative transaction with any person and with any partnership, joint venture, or unincorporated association of which the person is a partner or a member shall be included unless the person is a limited partner, but not a general partner, in a limited partnership, or unless the person is a partner in a limited or general partnership, or a member of a joint venture or unincorporated association, if such partner or member, by law, by the terms of the partnership, joint venture, or membership agreement, or by the terms of an agreement with the depository financial services loan company, is not to be held liable to the depository financial services loan company for the debts of the partnership, joint venture, or association. In computing the total loans and extensions of credit made by a depository financial services loan company to any firm, partnership, joint venture, or unincorporated association, all loans and extensions of credit to and all credit exposure arising from a derivative transaction with its individual partners or members shall be included unless such individual partner is a limited partner, but not a general partner, in a limited partnership, or unless such individual partner or member, by law, by the terms of the partnership, joint venture, or membership agreement, or by the terms of an agreement with the depository financial services loan company, is not to be held liable to the depository financial services loan company for the debts of the partnership, joint venture, or association.

(e) Alternatively, a depository financial services loan company, with the prior approval of the commissioner, may comply with the lending limits applicable to federal financial institutions as and to the same extent it would, at the time, be so required by federal law or regulation if it were a federal financial institution. A depository financial services loan company utilizing this alternative shall use a single method for calculating lending limits, including any credit exposure to the person arising from a derivative transaction, repurchase agreement, reverse purchase agreement, securities lending transaction, or securities borrowing transaction between the depository financial services loan company and the person. In monitoring a depository financial services loan company's compliance with the federal financial institution lending limits, the commissioner shall give substantial weight to the Office of the Comptroller of the Currency's regulations and opinions interpreting the federal financial institution lending limits, including but not limited to those related to the internal model method or the conversion factor matrix method for calculating credit exposure to derivative transactions as described in title 12 Code of Federal Regulations part 32 of the Interim Rule as may be amended. The commissioner will regard the regulations and opinions as strong evidence of safe and sound banking practices. [L 1993, c 350, pt of §1; am L 2013, c 172, §9]