(a) An extension of credit
is a making or renewal of any loan, a granting of a line of credit,
or an extending of credit in any manner whatsoever, and includes—
(1) a purchase under repurchase
agreement of securities, other assets, or obligations;
(2) an advance by means of
an overdraft, cash item, or otherwise;
(3) issuance of a standby letter of credit
(or other similar arrangement regardless of name or description) or
an ineligible acceptance, as those terms are defined in section 208.24
of this part;
(4) an
acquisition by discount, purchase, exchange, or otherwise of any note,
draft, bill of exchange, or other evidence of indebtedness upon which
an insider may be liable as maker, drawer, endorser, guarantor, or
surety;
(5) an increase
of an existing indebtedness, but not if the additional funds are advanced
by the bank for its own protection for—
(i) accrued
interest or
(ii)
taxes, insurance, or other expenses incidental to the existing indebtedness;
(6) an advance
of unearned salary or other unearned compensation for a period in
excess of 30 days; and
(7) any other similar transaction as a result of which a person becomes
obligated to pay money (or its equivalent) to a bank, whether the
obligation arises directly or indirectly, or because of an endorsement
on an obligation or otherwise, or by any means whatsoever.
3-969
(b) An extension of credit does not include—
(1) an advance against accrued
salary or other accrued compensation, or an advance for the payment
of authorized travel or other expenses incurred or to be incurred
on behalf of the bank;
(2) a receipt by a bank of a check deposited in or delivered to the
bank in the usual course of business unless it results in the carrying
of a cash item for or the granting of an overdraft (other than an
inadvertent overdraft in a limited amount that is promptly repaid,
as described in section 215.4(e) of this part;
(3) an acquisition of a note, draft, bill
of exchange, or other evidence of indebtedness through—
(i) a merger
or consolidation of banks or a similar transaction by which a bank acquires
assets and assumes liabilities of another bank or similar organization
or
(ii) foreclosure
on collateral or similar proceeding for the protection of the bank,
provided that such indebtedness is not held for a period of more than
three years from the date of the acquisition, subject to extension
by the appropriate federal banking agency for good cause;
(4) (i) an endorsement or
guarantee for the protection of a bank of any loan or other asset
previously acquired by the bank in good faith or
(ii) any indebtedness to a bank for
the purpose of protecting the bank against loss or of giving financial
assistance to it;
(5) indebtedness of $15,000 or less arising
by reason of any general arrangement by which a bank—
(i) acquires
charge or time credit accounts or
(ii) makes payments to or on behalf
of participants in a bank credit card plan, check credit plan, or
similar open-end credit plan, provided—
(A) the indebtedness
does not involve prior individual clearance or approval by the bank
other than for the purposes of determining authority to participate
in the arrangement and compliance with any dollar limit under the
arrangement, and
(B) the
indebtedness is incurred under terms that are not more favorable than
those offered to the general public;
(6) indebtedness of $5,000
or less arising by reason of an interest-bearing overdraft credit
plan of the type specified in section 215.4(e);
(7) a discount of promissory notes, bills
of exchange, conditional sales contracts, or similar paper, without
recourse; or
(8) except
for purposes of section 215.5 of this part, a loan:
(i) made
pursuant to the “Paycheck Protection Program” in which
the participation by the Small Business Administration on a deferred
basis is 100 percent;
(ii) for which material terms, including the maturity and the interest
rate, are set by the Small Business Administration;
(iii) that is made during the “covered
period,” as that term is defined in 15 U.S.C. 636(a)(36)(A)(iii),
but in no case later than March 31, 2022; and
(iv) that would not be prohibited
by 13 CFR 120.110(o) or rules or interpretations thereof issued by
the Small Business Administration.
3-970
(c) Non-interest-bearing deposits to the credit of a bank are not
considered loans, advances, or extensions of credit to the bank of
deposit; nor is the giving of immediate credit to a bank upon uncollected
items received in the ordinary course of business considered to be
a loan, advance, or extension of credit to the depositing bank.
(d) For purposes of section 215.4 of this part,
an extension of credit by a member bank is considered to have been
made at the time the bank enters into a binding commitment to make
the extension of credit.
(e) A participation without
recourse is considered to be an extension of credit by the participating
bank, not by the originating bank.
(f) Tangible-economic-benefit rule.
(1) In general. An extension of credit is considered made to an insider to the extent
that the proceeds are transferred to the insider or are used for the
tangible economic benefit of the insider.
(2) Exception. An extension of credit is not considered made to an insider under
paragraph (f)(1) of this part if—
(i) the credit is extended
on terms that would satisfy the standard set forth in section 215.4(a)
of this part for extensions of credit to insiders; and
(ii) the proceeds of the
extension of credit are used in a bona fide transaction to
acquire property, goods, or services from the insider.
