Rule 80-1-5-.04 - Participation Loans(1) That portion of a loan which is sold by the originating bank to another bank must conform to all laws and regulations applicable to that category of loan to the same extent as if the purchasing bank had itself originated the loan; i.e., collateral documentation, maturity, loan-to-collateral value ratio, maximum loan limits, etc. The purchasing bank shall obtain from the selling bank copies of all pertinent documents or a summary of sufficient information therefrom to allow that bank to conclude that all legal and regulatory requirements have been met and that the loan may be legally carried upon its books.(2) Participation in Pools of Loans or Discount Lines: (a) Loans contained in the pool or discount line must be physically marked or specifically identified on the selling bank's records.(b) The participation agreement must call for the participant to share pro rata in losses experienced by the pool or discount line.(c) The participation agreement must provide for periodic, at least quarterly, reports by the seller to the purchaser as settlement for losses incurred and providing past due status of loans contained in the pool or discount line.(d) Where the participation purchased is in excess of fifteen (15) percent of the purchasing bank's statutory capital base, the participation must have the prior written approval of the bank's Board of Directors or Loan Committee.(3) Where there exist agreements to repurchase or loss indemnity agreements between the selling and purchasing banks, participations shall be treated as loans to the selling bank by the purchasing bank and the amount of the participation shall be considered to be remaining on the selling bank's books for purposes of legal limitations.(4) The portion of a loan or extension of credit sold as a participation on a nonrecourse basis shall not constitute a loan or extension of credit for purposes of O.C.G.A. § 7-1-285, provided that the participation results in a pro rata sharing of credit risk proportionate to the respective interests of the originating and participating lenders. Where a participation agreement provides that repayment must be applied first to the portions sold, a pro rata sharing will be deemed to exist only if the agreement also provides that, in the event of default or comparable event defined in the agreement, participants must share in all subsequent repayments and collections in proportion to their percentage participation at the time of the occurrence of the event.Ga. Comp. R. & Regs. R. 80-1-5-.04
Ga. L. 1974, pp. 733, 791-792; Ga. L. 1983, Act No. 255, effective March 16, 1983.
Original Rule entitled "Participation Loans" was filed on August 28, 1975, effective September 17, 1975.Amended: Filed August 17, 1983; effective September 6, 1983.Amended: Filed June 28, 1984; effective August 1, 1984, as specified by the Agency.Amended: F. June 29, 2017; eff. July 19, 2017.