TO AMEND THE LAW CONCERNING LOANS INVOLVING THE STOCK OF A STATE BANK.

Arkansas banks gain limited stock-backed lending

Arkansas state banks can handle certain loans backed by their own stock or their holding company’s stock. Banks generally cannot knowingly lend to stockholders against that stock, finance its purchase, or hold loans representing investments in it. Banks can collect that stock for debts previously made in good faith without violating the lending or purchase-financing bans. They must sell the stock within two years. Banks can also acquire stock-backed loans through mergers or similar deals approved by the Bank Commissioner. Merger partners can include Arkansas state banks, out-of-state state-chartered banks, national banks, and other depository or financial institutions. Banks can keep, renew, extend, modify, or refinance these loans without increasing the amount committed when acquired. Terms must remain substantially similar, with lending checks at least as strict as comparable loans without that stock. Banks can also make or keep loans backed by securities accounts containing their own or their holding company’s stock. The bank or holding company must qualify for the exemption under Arkansas Code § 23-48-316(b)(3). Written bank policies must exclude that stock from loan approval decisions, and other applicable laws and rules still apply. Officers, directors, or stockholders who violate these rules face civil penalties of $1,000 per day, capped at $100,000 per violation. The Bank Commissioner can impose penalties through existing cease-and-desist authority. These changes govern bank lending and provide no direct household payment.