The OCC is proposing to extend for three years a pilot program that allows participating national banks to take advantage of higher state lending limits for real estate and small business loans.
Currently, OCC rules permit national banks to make loans in an amount up to 15% of capital and surplus to a single borrower. National banks may extend credit by another 10% of capital and surplus if the excess amount is secured by "readily marketable collateral." To enable community banks to remain competitive in states where state-chartered banks have higher lending limits, the OCC established a three-year pilot program in June 2001 for eligible national banks to apply to make residential real estate loans and small business loans up to the state lending limits under certain conditions. To be eligible, national banks must be well-capitalized with a CAMELS rating of 1 or 2 and at least a 2 rating for asset quality and for management.
The OCC is proposing to extend the pilot program for another three years to June 2007. As of February 2004, 169 national banks headquartered in 23 states had received approval to participate in the program. The OCC compared the safety and soundness performance of 129 banks in the program to comparable state-chartered banks and concluded that there were no statistical differences between them. However, in the OCC's view, due to the limited number of participating banks and the small amount of data available for review, it is premature to reach any conclusions about the program.
Comments are due May 24, 2004. If the pilot program is extended, existing participants will not have to reapply.