State of Kansas
State Bank Commissioner
Special Order 1995-1
This Order issued this 9th day of May, 1995, by the State Bank Commissioner.
Whereas, 12 U.S.C. §84(c)(6) provides national banks with the following exception to the general lending limitations set out at 12 U.S.C. §84(a):
"(c) Exceptions. The limitations contained in subsection (a) shall be subject to the following exceptions:
. . . (6) Loans or extensions of credit secured by a segregated deposit account in the lending bank shall not be subject to any limitation based on capital and surplus"; and,
Whereas, K.S.A. 9-1104(a)(7) provides state banks with the following similar exception to the lending limits set out at K.S.A. 9-1104(a):
"(7) the whole or that portion of any loan which is secured as to payment by a time deposit of the borrower in the bank in an amount equal to 115% of the amount of the indebtedness shall be exempt from any limitation under this subsection"; and
Whereas, the exception provided for by 12 U.S.C. §84(c)(6) applies to loans which are secured by segregated deposit accounts in an amount equal to or greater than 100% of the amount of the indebtedness, and the exception provided by K.S.A. 9-1104(a)(7) applies to loans which are secured by time deposits of the borrower in the bank in an amount equal to or greater than 115% of the amount of indebtedness, which creates a competitive disadvantage for Kansas state banks; and
Whereas, K.S.A. 9-1715 provides the state bank commissioner with the power to authorize state banks or trust companies to engage in any activity in which such banks or trust companies could engage were they operating as national banks; and
Whereas, the Commissioner deems the issuance of this special order as reasonably required to preserve and protect the welfare of state banks and to promote competitive equality of state and national banks;
It is therefore ordered that all loans or extensions of credit owned by a Kansas state bank which are secured by a segregated deposit account in the lending bank which is in an amount equal to or greater than 100% of the amount of the indebtedness shall not be included in the bank's legal lending limit as provided by K.S.A. 9-1104. Deposit accounts which may qualify for this exception include deposits in any form generally recognized as deposits, so long as the following criteria are
met:
(1) The bank must ensure that a security interest has been perfected in the deposit, including the assignment of a specifically identified deposit and any other action required by
Kansas law.
(2) In the case of a deposit eligible for withdrawal prior to the maturity of the secured loan, the bank shall establish internal procedures which will prevent the release of the security.
It is further ordered, pursuant to K.S.A. 9-1715(b) as amended, that the terms of this special order shall become effective May 9th, 1995 and shall remain in full force and effect until amended or revoked by the State Bank Commissioner.
It is so ordered.
State Bank Commissioner
Frank D. Dunnick
