Bill 856

                    Current Status

Bill Number:               856
Ratification Number:       448
Act Number:                391
Introducing Body:          Senate
Subject:                   Relating to limitations on loans to
                           directors and officers of banks and to
                           penalties for improper borrowing by them

(A391, R448, S856)

AN ACT TO AMEND SECTIONS 34-13-80, AS AMENDED, AND 34-13-90, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO LIMITATIONS ON LOANS TO DIRECTORS AND OFFICERS OF BANKS AND TO PENALTIES FOR IMPROPER BORROWING BY THEM, SO AS TO PROVIDE THAT BANK DIRECTORS OR OFFICERS OR A MEMBER OF A FIRM WHO IS ALSO ON THE BOARD OF DIRECTORS MAY BORROW IF SECURITY IS PROVIDED INSTEAD OF UPON A TWO-THIRDS APPROVAL OF THE BOARD; INCREASE THE LEGAL LENDING LIMITS OF BANKS TO DIRECTORS AND OFFICERS NOT TO EXCEED THE LESSER OF FIVE THOUSAND DOLLARS OR THE AMOUNT IN REGULATION O OF THE FEDERAL RESERVE SYSTEM; PROVIDE THAT THE LIABILITY TO A BANK BY ANY DIRECTOR OR OFFICER MAY NOT EXCEED FIFTEEN PERCENT OF THE BANK'S UNIMPAIRED CAPITAL STOCK OR SURPLUS; TO PROVIDE THAT THE LOAN RESTRICTIONS NOT APPLY TO A LIMITED PARTNERSHIP OR CORPORATION OWNED OR CONTROLLED BY A DIRECTOR OR OFFICER; TO PROVIDE THAT LOANS TO BANK EMPLOYEES, WHO AFTER OBTAINING A LOAN ARE PROMOTED TO OFFICERS, MAY CONTINUE UNSECURED IF REPAID ON ORIGINAL TERMS AND ARE NOT RENEWED; AND TO REMOVE PROVISIONS GOVERNING BORROWING BY BANK DIRECTORS OR OFFICERS FROM SECTIONS 34-13-90 TO 34-13-80 AND RETAIN THE PENALTY FOR IMPROPER BORROWING BY DIRECTORS OR OFFICERS.

Be it enacted by the General Assembly of the State of South Carolina:

Limitations on loans

SECTION 1. Section 34-13-80 of the 1976 Code, as last amended by Act 304 of 1980, is further amended to read:

"Section 34-13-80. No director or officer of any bank incorporated under the statutes of this State, may borrow therefrom, except on good security. No general partnership or unincorporated firm, company, or proprietorship, in which an officer or director or his spouse or unemancipated children are part owners may borrow therefrom, except on good security. No director or officer of any such bank may become an endorser or surety upon any loan or credit made or extended to any other director or officer of such bank. Any director or officer of such bank may borrow unsecured by a prearranged interest bearing overdraft or ready reserve credit and have outstanding at any time an amount not to exceed the lesser of five thousand dollars or the amount contained in Regulation O of the Federal Reserve System. The total liabilities to any such bank of any director or officer or any partnership or company of which such director or officer is a partner or member, or any firm or corporation of which such director or officer is either an officer or director, may not exceed fifteen percent of the bank's unimpaired capital stock and unimpaired surplus. The total liability to any such bank of any such director or officer shall have the prior approval of a majority of the whole board of directors of such bank when such liabilities exceed five percent in the aggregate of such bank's unimpaired capital stock and unimpaired surplus. In the computation of the total liability of a director or officer to the bank, there must be included all loans and credits from the bank, direct or indirect, to him or to any partnership, firm, company, corporation or other organization owned by him or his spouse or unemancipated children. In addition, all loans or credits from the bank to a partnership, company, firm, corporation or other organization in which the director or officer or his spouse or unemancipated children own ten percent or more of the capital stock or other evidences of financial interest or ownership must be included in such computation. When any group of directors in the same bank owns an aggregate interest of ten percent or more in the same business, the liability of the business to the bank must be included as a part of the total liability of each director owning any part of the business.

The above restrictions on officers and directors and their interests, against borrowing from a bank except on good security, shall not apply to any limited partnership or corporation wholly or partially owned or controlled by any director or officer of such bank or by his spouse or by his unemancipated children, so long as such loans are made on substantially the same terms and conditions for comparable transactions at the time with other persons and does not involve more than the normal risk of repayment or present other unfavorable features.

Any outstanding loans to employees of such a bank, who subsequent to obtaining a loan therefrom, are promoted to officers in such bank, may continue unsecured if the loan is repaid according to its original terms and conditions and is not renewed.

The provisions of this section do not apply to loans on cotton in bale, soybeans, corn, oats, wheat, rye, or barley stored in warehouses and evidenced by receipts issued therefor by a bank to any of its directors or officers, in which case loans may be made as in other instances.

The provisions of this section do not apply to loans made to eleemosynary or nonprofit corporations, or to county business development corporations incorporated under the provisions of Chapter 39 of Title 33."

Penalty

SECTION 2. Section 34-13-90 of the 1976 Code is amended to read:

"Section 34-13-90. Anyone who violates the provisions of Section 34-13-80 must upon conviction after indictment be punished by fine or imprisonment or both, at the discretion of the court."

Time effective

SECTION 3. This act shall take effect upon approval by the Governor.