Banking Interpretations

NYSBL 103(1)

June 14, 1994

[ ]

Re: Banking Law Section 103(1)

Dear [ ]:

You have inquired whether [ ] may honor pre-existing loan commitments to a borrower that exceed the lending limits set forth in Section 103(1) of the Banking Law due to a decrease in the Bank's capital.

Section 103 (1) of the Banking Law states the general rule that no bank shall lend to any person an amount which will exceed fifteen percent of the bank's capital stock, surplus fund and undivided profits. The statute, however, is silent with respect to what actions a bank can take in the event of a reduction in its capital between the time it commits to make the loan and the time it funds the loan.

If the commitment made by the bank is legally binding and within the bank's lending limits at the time of commitment, it is the Department's position that it may fund the loan despite the fact that its capital has fallen in the interim.

If I can provide additional assistance, please feel free to contact me.

Very truly yours,

Stacey M. Cooper
Assistant Counsel