P.R. Laws tit. 7, § 113
(a) Banks, or foreign banks, including their units and subsidiaries thereof, considered jointly for the purposes of this subsection, corporation:
(1) One (1) or more loans, or transactions that constitute in any way extensions of credit, totaling an amount greater than fifteen percent (15%) of the paid-in capital in common and preferred stock, the reserve fund of said bank, and those other components which the Commissioner may determine from time to time.
(2) Nor shall it accept the security of any one person, firm, partnership or corporation for an amount exceeding fifteen percent (15%) of its paid-in capital in common and preferred stock, the reserve fund of said bank, and those other components which the Commissioner may determine from time to time.
(b) The preceding restrictions shall not apply to:
(1) Loans or discounts secured by collateral worth at least twenty-five percent (25%) more than the amount of the loan;
(2) nor to the discount of bills of exchange, provided such loans so secured and such bills of exchange, provided said loans so secured and such discounts of bills of exchange do not exceed thirty-three and one third percent (33 1 / 3 %) of the paid-in capital in common and preferred stock, reserve fund of said bank and those other components the Commissioner may determine from time to time, including the loans and discounts referred to in subsection (a) of this section.
(3) Nor to loans granted to the Government of the United States or to the Government of Puerto Rico, or to their respective authorities, instrumentalities, dependencies or municipalities.
(c) Neither shall the provisions of subsection (a) of this section apply to:
(1) The discount and purchase of drafts or bills of exchange or commercial acceptances with a maturity date not exceeding six (6) months which are the result of transactions related to the importing or exporting of articles of commerce from or to foreign countries or which are the result of transactions involving the shipping of articles of commerce within the jurisdictional boundaries of Puerto Rico or to the United States of America or its territories or possessions.
(2) Nor to loans wholly secured by bonds, securities and other evidences of indebtedness of the Government of the United States or of the Government of Puerto Rico, or by current debt bonds, not in default, of the authorities, instrumentalities or dependencies of the Government of Puerto Rico or its municipalities.
(3) Loans acquired by the bank under purchase contracts with recourse that involve a portfolio of individual mortgage loans if the individual loans that comprise the portfolio:
(A) Have been extended to persons not affiliated with the selling bank or financial institution, originator, assignor or endorser of the same;
(B) they comply, severally and jointly, with any other loans from the acquiring bank with the lending margin of fifteen percent (15%) established in subsection (a)(1) of this section, to the same person;
(C) they have collateral consisting of first mortgages whose collateral is assessed as at least one hundred percent (100%) of the amount of the loan on real estate;
(D) the transfer of the loans to the bank acquiring the contract with recourse qualifies as a sale for accounting purposes, and
(E) if the selling institution retains the management (“servicing”) of the loans transferred to the acquiring institution, the acquiring institution must obtain evidence that the selling institution maintains the adequate fidelity, errors and omissions insurance coverage.
(d) In the application of these restrictions the total amount of the loans and discounts made to person, firm or corporation, plus the loans in which the same person, firm or corporation is surety, shall not exceed, in total, thirty-three and one third percent (33 1 / 3 %) of the paid-in capital in common and preferred stock, the reserve fund of said bank, and those other components which the Commissioner may determine from time to time. Provided, That the aforesaid restrictions shall not apply in the case of loans granted to the Government of the United States or to the Government of Puerto Rico, or to their respective authorities, instrumentalities, dependencies or municipalities.
(e)
(1) The restrictions listed in this section are not applicable to the loans or other transactions that constitute “covered transactions” as defined in Section 23A mentioned below, granted by the bank to its subsidiaries or affiliates. It is provided that Sections 23A and 23B of the federal act known as the “Federal Reserve Act”, as amended, shall be applicable to said loans and transactions in the same manner and to the same extent as if the bank were a member of the Federal Reserve. For the purposes of this section, the term “affiliate” shall have the same meaning provided in said banking affiliates of a bank, the bank or foreign bank may not, without the prior authorization of the Commissioner, make one or more loans or credit extensions or covered transactions, as defined above, totaling an amount greater than that allowed by subsections (a) and (b) of this section.
(2) The Commissioner may promulgate those regulations, and issue those orders and interpretations that he/she deems necessary to administer, implement and attain the purposes of this section, including those necessary to define terms used in this section, and to establish restrictions or additional requirements in addition to those established in this section for classifications or types of loans or particular credit extensions.
(f) Any violation of the provisions of this section by any bank of foreign bank shall be sufficient reason for the Commissioner to impose on it an administrative fine of not less than one thousand dollars ($1,000) nor more than five thousand dollars ($5,000) or of the total interest which such loans or discounts may have yielded the bank, as of the date on which said violation occurred, whichever is greater, or at the discretion of the Commissioner, subject to the provisions of § 118 of this title, for the cancellation of its license.
(g) Every partnership or corporation and its affiliates shall be deemed as a single person, partnership or corporation when:
(1) A corporation holds more than fifty percent (50%) of the total capital of another corporation, or fifty percent (50%) of the voting stock thereof.
(2) A partnership holds more than fifty percent (50%) of the total capital stock of a corporation or when it holds more than fifty percent (50%) of the voting stock of said corporation.
(3) A natural person holds more than fifty percent (50%) of the capital stock of a corporation or more than fifty percent (50%) of the voting stock.
(4) A natural person who holds more than fifty percent (50%) of the total capital of a partnership.
(h) No bank organized under §§ 1 et seq. of this title, or that is henceforth organized or established or commences to do business in Puerto Rico, shall invest a sum in loans and discounts during the first three (3) years of its operation, that exceeds its available capital plus fifty percent (50%) of the money of the depositors, excepting the deposits of public funds secured by collateral. For the purposes of this paragraph, the term “available capital” shall mean the total paid-in capital in common and preferred stock, plus the reserve fund minus the book value of the bank building and its equipment and any other real property belonging to the institution; Provided, That for the application of this provision due regard shall be given to unexpected withdrawals of funds by depositors; and furthermore, Provided, That during the course of those first three years and as circumstances may warrant, the Commissioner may authorize an increased proportion of loans in relation to deposits, and finally; Provided, That the remainder of the fifty percent (50%) of the depositors money, or the remaining balance should the Commissioner authorize an increased proportion of loans in relation to the deposits, shall remain in said banks as a reserve, in cash or in short-term obligations; which shall the latter to be obligations of the federal government, of the Government of Puerto Rico, or its instrumentalities or of any municipality of Puerto Rico. Any director or manager of any bank who violates any of the provisions of this paragraph shall be subject to an administrative fine imposed by the Commissioner of not less than one thousand dollars ($1,000) nor more than five thousand dollars ($5,000) for the first violation, and in the case of a second or subsequent violation, he/she shall be guilty of a felony and upon conviction thereof punished by a fine of not less than five thousand dollars ($5,000) nor more than ten thousand dollars ($10,000) or a term of imprisonment of not more than two years, or both penalties at the discretion of the court.
(i) No bank or foreign bank shall make loans or discounts secured by its own stock, nor shall it purchase or hold its own stock unless such security or purchase is necessary to prevent losses because of a debt previously contracted in good faith, and the stock so purchased or acquired shall be sold at public or private sale within a term of one year from the date of acquisition. The previous restriction is not extended to those cases provided in § 38 of this title.
Any director or manager of any bank or foreign bank who violates any of the provisions of this subsection may be subject to an administrative fine imposed by the Commissioner of not less than five thousand dollars ($5,000) nor more than ten thousand dollars ($10,000) for each day the bank withholds such stock in the case of a first violation, and in the case of a second or subsequent violation, he/she shall be guilty of a felony and upon conviction thereof punished by a fine of not more than fifty thousand dollars ($50,000) for each day the bank withholds such stock.
(j) No bank or foreign bank, nor any of its directors, officials, agents or employees shall purchase, nor directly or indirectly be a party in the purchase of a promissory note or other negotiable instrument issued by said bank (with the exception of stocks and bonds issued by said bank) for a lesser sum than that for which it is drawn or for less than its market value. Any bank, foreign bank or person that violates this provision shall be guilty of a crime and punished by a fine of not less than five hundred and one dollars ($501) and up to a maximum of three (3) times the face value of the negotiable instrument so purchased, whichever amount is greater.
(k) Any bank or foreign bank may grant loans to its directors, principal stockholders and executive officials, as these are defined in the federal regulations applicable to banks organized under the laws of the United States of America, whether they are debtors, drawers, acceptors, endorsers, makers or guarantors. Said loans may be granted up to the maximum amounts and under conditions and limitations similar to those allowed to the banks organized under the laws of the United States of America under existing federal regulations. The term “principal stockholder” shall not include a company of which the bank is a subsidiary.
(l) The provisions of subsection (k) of this section shall apply to loans granted to any firm, partnership or corporation in which a director or executive official of a bank or foreign bank, holds or controls, directly or indirectly, twenty percent (20%) or more of the capital of said firm or partnership, or holds or controls, directly or indirectly, twenty percent (20%) or more of the voting stock of said corporation, and shall not obtain loans or make discounts in said bank or foreign bank, whether as debtor, drawer, acceptor, endorser, maker or guarantor, nor may said bank or foreign bank grant such a loan or authorize such discount unless they are granted within the maximum amounts permitted and under conditions and limitations similar to those to which the national banks are limited by the federal laws in effect.
(m) No principal stockholder of a bank, as this term is defined for subsections (k) and (l) of this section, nor any firm, partnership or corporation in which a director or executive official of a bank or foreign bank, holds or controls, directly or indirectly, twenty percent (20%) or more of the capital of said firm or partnership, or holds or controls, directly or indirectly, twenty percent (20%) or more of the voting stock of said corporation, and shall borrow loans or make any discount whatsoever in said bank whether as debtor, drawer, acceptor, endorser, maker or guarantor, nor shall said bank grant such loan or authorize such discount without the unanimous approval of its directors present, requiring a quorum of at least sixty-five percent (65%) of the total number of directors at the Board of Directors sessions in which said loans or discounts are considered.
(n) No directors of the bank or foreign bank shall borrow or make any discount whatsoever in said bank pursuant to subsection (m) of this section, whether as debtor, drawer, acceptor, endorser, maker or grantor, nor shall said bank grant such loan or authorize said discount without the unanimous approval of its directors present, requiring a quorum of sixty-five percent (65%) of the total number of directors in the sessions of the Board of Directors in which said loans or discount are considered.
(o) Every loan or discount approved pursuant to the provisions of the preceding subsections (k), (l), (m) and (n), shall be notified by said bank or foreign bank to the Commissioner with the details of the transaction in the quarterly financial reports submitted to the Commissioner within the term prescribed by the latter. The information to be submitted shall be equal in content to that which the federal legislation in effect requires the national banks to submit to their federal supervising agencies. Any director or executive official of a bank or foreign bank that authorizes or grants a loan or discount in violation of the provisions of any of the abovementioned subsections shall be subject to an administrative fine imposed by the Commissioner of not less than one thousand dollars ($1,000) nor more than ten thousand dollars ($10,000) in the case of a first infraction, and in the case of a second or subsequent infraction, shall be guilty of a felony, and upon conviction, shall be punished with a fine of not less than one thousand dollars ($1,000) nor more that twice the amount of the loan or discount, or imprisonment for a term of not more than six (6) months, or both penalties at the discretion of the court.
(p) No bank organized under the provisions of §§ 1 et seq. of this title shall change its juridical nature or become a corporate entity or an association under the provisions of other state or federal laws without the approval of the Commissioner.
(q) No bank or financial institution which is not authorized to do business in Puerto Rico may, on its own, or through its agents or representatives, publish or cause to be published any advertisement, article or other publication edited and of general circulation in Puerto Rico, nor may it broadcast by radio or television or any other public communication medium in Puerto Rico, any information in relation to the payment of interest or profits on bank deposits in savings accounts and on a fixed term, or any other type of deposit account.
(r) No bank or foreign bank shall publicize, whether it be in the press, or by radio, television, exhibition or in any other media, or make any representation of any nature, which is inaccurate or false or which otherwise any manner deceitfully describes its services, contracts, investments or financial condition.
History —May 12, 1933, No. 55, p. 322, § 17; May 12, 1936, No. 74, p. 374, § 6; May 15, 1938, No. 199, p. 387, § 3; June 3, 1948, No. 6, p. 16, § 1; Aug. 19, 1948, No. 4, p. 186, § 1; May 15, 1950, No. 430, p. 1056, § 6; Sept. 7, 1961, No. 12, p. 353, § 1; June 21, 1962, No. 85, p. 214; June 29, 1965, No. 110, p. 300, § 1; June 6, 1968, No. 71, p. 122; June 30, 1971, No. 124, p. 375, § 2; July 23, 1974, No. 165, Part 1, p. 767, § 6; Feb. 6, 1979, No. 11, p. 23; June 27, 1987, No. 66, p. 213; Aug. 10, 1988, No. 157, p. 677; Aug. 28, 1997, No. 108, § 18; Sept. 2, 2000, No. 352, § 1; Sept. 8, 2000, No. 388, § 3; Feb. 23, 2007, No. 14, §§ 1—3.