(a) In general. A member bank may not purchase a low-quality asset
from an affiliate unless, pursuant to an independent credit evaluation,
the member bank had committed itself to purchase the asset before
the time the asset was acquired by the affiliate.
(b) Exemption for renewals of loan participations
involving problem loans. The prohibition contained in paragraph
(a) of this section does not apply to the renewal of, or extension
of additional credit with respect to, a member bank’s participation
in a loan to a nonaffiliate that was originated by an affiliate if—
(1) the loan was not a low-quality
asset at the time the member bank purchased its participation;
(2) the renewal or extension
of additional credit is approved, as necessary to protect the participating
member bank’s investment by enhancing the ultimate collection of the
original indebtedness, by the board of directors of the participating
member bank or, if the originating affiliate is a depository institution,
by—
(i) an executive committee of the board
of directors of the participating member bank; or
(ii) one or more senior management officials
of the participating member bank, if—
(A) the board of directors
of the member bank approves standards for the member bank’s renewals
or extensions of additional credit described in this paragraph (b), based
on the determination set forth in paragraph (b)(2) of this section;
(B) each renewal or extension
of additional credit described in this paragraph (b) meets the standards;
and
(C) the board of directors
of the member bank periodically reviews renewals and extensions of
additional credit described in this paragraph (b) to ensure that they
meet the standards and periodically reviews the standards to ensure
that they continue to meet the criterion set forth in paragraph (b)(2)
of this section;
(3) the participating member
bank’s share of the renewal or extension of additional credit does
not exceed its proportional share of the original transaction by more
than 5 percent, unless the member bank obtains the prior written approval
of its appropriate federal banking agency; and
(4) the participating member bank provides
its appropriate federal banking agency with written notice of the
renewal or extension of additional credit not later than 20 days after
consummation.
