(a) No bank shall permit a person to become indebted or liable to it, either directly or indirectly on loans and extensions of credit, including any credit exposure arising out of derivative transactions entered into by a bank and its subsidiaries, in a total amount outstanding at any one time in excess of twenty per cent of the capital and surplus of the bank.

Terms Used In Hawaii Revised Statutes 412:5-302

  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • Capital: means :

    (1) The aggregate par value or other amount received and allocated to the issued and outstanding capital stock of a financial institution; or

    (2) The total amount of a credit union's outstanding and unimpaired membership shares or share accounts. See Hawaii Revised Statutes 412:1-109

  • Commissioner: means the commissioner of financial institutions of this State. See Hawaii Revised Statutes 412:1-109
  • Contract: A legal written agreement that becomes binding when signed.
  • county: includes the city and county of Honolulu. See Hawaii Revised Statutes 1-22
  • Depository institution: means a financial institution that is authorized to accept deposits under its chartering or licensing authority and includes a bank, savings bank, savings and loan association, depository financial services loan company, credit union, or intra-Pacific bank. See Hawaii Revised Statutes 412:1-109
  • deposits: means money or its equivalent received or held by a person in the usual course of business and for which it has given or is obligated to give credit, either conditionally or unconditionally, to a demand, checking, savings, time, passbook, negotiable order of withdrawal, thrift, or share account, or which is evidenced by its passbook, certificate of deposit, thrift certificate, investment certificate, certificate of indebtedness, or other similar instrument, or a check, draft, or share draft drawn against a deposit account and certified by a person, on which the person is primarily liable. See Hawaii Revised Statutes 412:1-109
  • Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
  • Federal: means belonging to, part of, or related to the government of the United States of America. See Hawaii Revised Statutes 412:1-109
  • Federal financial institution: means a national banking association, federal savings bank, federal savings and loan association or federal credit union. See Hawaii Revised Statutes 412:1-109
  • Federal Home Loan Bank: means a federal home loan bank created and organized under the authority of the Federal Home Loan Bank Act. See Hawaii Revised Statutes 412:1-109
  • Federal Reserve Bank: means a federal reserve bank created and organized under the authority of the Federal Reserve Act. See Hawaii Revised Statutes 412:1-109
  • Financial institution: means a Hawaii financial institution, and unless the context indicates otherwise, a federal financial institution or foreign financial institution. See Hawaii Revised Statutes 412:1-109
  • Loans and extensions of credit: includes a contractual commitment to advance funds. See Hawaii Revised Statutes 412:1-109
  • Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
  • Person: means a natural person, entity or organization, including without limitation an individual, corporation, joint venture, partnership, sole proprietorship, association, cooperative, estate, trust, or governmental unit. See Hawaii Revised Statutes 412:1-109
  • Recourse: An arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank's claim on the asset. If a bank has no claim on an asset it has sold, then the retention of any credit risk is recourse. Source: FDIC
  • surplus: includes retained earnings, whether or not transferred or allocated to surplus. See Hawaii Revised Statutes 412:1-109
  • this State: means the State of Hawaii, its political subdivisions, agencies, and departments. See Hawaii Revised Statutes 412:1-109
(b) As used in this section, a “derivative transaction” includes any transaction that is a contract, agreement, swap, warrant, note, or option that is based, in whole or in part, on the value of, any interest in, any quantitative measure of or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets.
(c) This section applies to all loans and extensions of credit made and to all credit exposure arising out of derivative transactions entered into by a bank and its subsidiaries. It does not apply to loans and extensions of credit made by a bank or its subsidiaries to its affiliates or subsidiaries.
(d) The limitations set forth in this section shall not apply to:

(1) A bank’s eligible acceptances as described in section 412:5-204(b);
(2) A bank’s purchase or discount of another bank’s acceptances of the kinds described in section 13 of the Federal Reserve Act;
(3) A bank’s deposits with a Federal Reserve Bank, Federal Home Loan Bank, or another depository institution made in compliance with this chapter;
(4) A bank’s sale of federal funds to another depository institution with a maturity of one business day or under a continuing contract;
(5) Loans and extensions of credit secured by the interest-bearing obligations of the United States or those for which the faith and credit of the United States are distinctly pledged to provide for the payment of the principal and interest thereof or of the State or any county or municipal or political subdivision of this State, issued in compliance with the laws of this State, where the market value of the security shall be at any time not less than one hundred five per cent of the face amount of the loans and extensions of credit;
(6) Loans and extensions of credit to the extent secured by a pledge or security interest in a deposit account in the lending bank; and
(7) Loans and extensions of credit arising from the discount of negotiable or nonnegotiable credit sales contracts which carry a partial recourse endorsement or limited guarantee by the person transferring the credit sales contracts, if the bank’s respective file or the knowledge of its officers of the financial condition of each maker of the credit sales contract is reasonably adequate, and an officer of the bank certifies in writing that the bank is relying primarily upon the responsibility of each maker for payment of the credit sales contract, and not upon any partial recourse endorsement or limited guarantee by the transferor. Under these circumstances, the credit sales contract will be considered a loan and extension of credit to the maker of the credit sales contract rather than the seller of the credit sales contract.
(e) In computing the total loans and extensions of credit made by a bank to any person, all loans and extensions of credit by the bank to the person and to any partnership, joint venture, or unincorporated association of which the person is a partner or a member and all credit exposure arising from a derivative transaction with any person and with any partnership, joint venture, or unincorporated association of which the person is a partner or a member shall be included unless the person is a limited partner, but not a general partner, in a limited partnership, or unless the person is a partner in a limited or general partnership, or a member of a joint venture or unincorporated association, if such partner or member, by law, by the terms of the partnership, joint venture, or membership agreement, or by the terms of an agreement with the bank, is not to be held liable to the bank for the debts of the partnership, joint venture, or association. In computing the total loans and extensions of credit made by a bank to any firm, partnership, joint venture, or unincorporated association, all loans and extensions of credit to and all credit exposure arising from a derivative transaction with its individual partners or members shall be included unless such individual partner is a limited partner, but not a general partner, in a limited partnership, or unless such individual partner or member, by law, by the terms of the partnership, joint venture, or membership agreement, or by the terms of an agreement with the bank, is not to be held liable to the bank for the debts of the partnership, joint venture, or association.
(f) Alternatively, a bank may, with the prior approval of the commissioner, comply with the lending limits applicable to federal financial institutions, as and to the same extent it would, at the time, be so required by federal law or regulation if it were a federal financial institution. A bank utilizing this alternative shall use a single method for calculating lending limits, including any credit exposure to the person arising from a derivative transaction, repurchase agreement, reverse purchase agreement, securities lending transaction, or securities borrowing transaction between the bank and the person. In monitoring a bank’s compliance with the federal financial institution lending limits, the commissioner shall give substantial weight to the Office of the Comptroller of the Currency’s regulations and opinions interpreting the federal financial institution lending limits, including but not limited to those related to the internal model method or the conversion factor matrix method for calculating credit exposure to derivative transactions as described in title Title 12 of the Code of Federal Regulations, Part 32 of the Interim Rule as may be amended. The commissioner will regard the regulations and opinions as strong evidence of safe and sound banking practices.

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