2013 -- S 0636

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LC01672

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO FINANCIAL INSTITUTIONS -- POWERS AND OPERATIONS

     Introduced By: Senators Picard, and Walaska

     Date Introduced: March 06, 2013

     Referred To: Senate Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 19-3-3 of the General Laws in Chapter 19-3 entitled "Powers and

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Operations" is hereby amended to read as follows:

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     19-3-3. Maximum aggregate liability of one person or company. -- (a) No financial

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institution shall permit any person or entity to borrow or guaranty an amount(s), directly or

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indirectly, in the aggregate, which exceeds fifteen percent (15%) of its unimpaired capital. In

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calculating this limitation, a financial institution shall take into account the credit exposure to any

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such person or entity arising from derivative transactions. The director shall have the authority to

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establish the method for determining the credit exposure and the extent to which the credit

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exposure shall be taken into account. As used in this subsection, "derivative transaction" includes

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any transaction that is a contract, agreement, swap, warrant, note or option that is based, in whole

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or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any

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event leading to, one or more commodities, securities, currencies, interest or other rates, indices

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or other assets. The director may adopt regulations establishing the method for determining credit

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exposure to derivative transaction and the extent to which the credit exposure shall be taken into

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account. The director shall apply the limitation included herein to derivative transaction entered

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into on or after January 1, 2013.

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     This limitation shall not include:

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      (1) Obligations issued by the United States;

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      (2) General obligations of the state of Rhode Island;

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      (3) Loans or any portion thereof which are insured or guaranteed by the United States or

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any agency thereof;

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      (4) Inter-bank transactions involving the transfer of immediately available funds

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resulting from credits to deposit balances at federal reserve banks or from credit to new or

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existing deposit balances due from a correspondent depository institution (commonly known as

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the sale of federal funds) with a maturity of one business day or less; or

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      (5) Loans secured by deposits within the financial institution where a perfected interest

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in the deposits is on record.

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      (b) To the extent that a deposit taking institution regulated by the federal office of thrift

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supervision and insured by the federal deposit insurance corporation is expressly permitted to

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make loans that would exceed the limitations set forth in this section, the lending limitations of

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the office of thrift supervision shall apply. Nothing herein shall limit the department of business

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regulation from taking any action it deems appropriate to maintain appropriate safety and

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soundness standards relative to any loan or loans made by any financial institutions.

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     SECTION 2. This act shall take effect upon passage.

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LC01672

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO FINANCIAL INSTITUTIONS -- POWERS AND OPERATIONS

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     This act would amend the financial institutions lending limits language of the general

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laws to ensure that such limits are also applied to derivative transactions entered into by financial

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institutions.

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     This act would take effect upon passage.

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LC01672

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