Current through November 25, 2024
Section DFI-SB 3.06 - Restrictions on loans, other investments, and property transactions involving affiliated persons(1) RESTRICTIONS ON LOANS AND OTHER TRANSACTIONS WITH AFFILIATED PERSONS. (a) No savings bank or subsidiary may, either directly or indirectly, make a loan to any person affiliated with the savings bank under s. 214.01(2), Stats., or purchase such a loan, except for loans in the ordinary course of business of the savings bank or subsidiary which do not involve more than the normal risk of collectibility or present other unfavorable features, and which do not exceed the loan amount which would be available to members of the general public of similar credit status applying for loans, of the following types:1. Loans secured by the principal residence of a person affiliated.2. Loans secured by deposit accounts maintained by the person affiliated at the savings bank.3. Loans for constructing, adding to, improving, altering, repairing, equipping, or furnishing the principal residence of the person affiliated.4. Loans in the form of overdraft protection for NOW accounts.5. Loans for payment of educational expenses, consumer loans, and extension of consumer credit in connection with credit cards.(b) A loan described in par. (a) shall be approved in advance by a resolution after full disclosure by at least a majority, with no director having an interest in the transaction voting, of the entire board of directors of the savings bank. Full disclosure includes a statement of whether the loan is made on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable loans to members of the general public. (c) A savings bank may not make loans under par. (b) at an interest rate below its current cost of funds, including all savings accounts and borrowings except that for a loan secured by a deposit account, the interest rate shall be at least 1% above the rate of return on the deposit account, and the resolution required by par. (b) must set forth:n 1. The savings bank's current cost of funds, including the elements of its computation.2. A justification of the more favorable rate, if the loan is to an affiliated person other than a salaried officer or employee of the savings bank or its subsidiary.(d) With respect to a loan under par. (b) to a salaried officer or employee of the savings bank or its subsidiary, the approval requirement of par. (c) will be satisfied if the loan conforms with a blanket-preapproval resolution of the board specifying the terms on which loans may be made to all officers or employees, or a class of officers or employees, and the loan documents set forth the savings bank's current cost of funds, including the elements of its computation. A savings bank may not use a blanket-preapproval resolution to make loans under par. (a) 3. to an affiliate in excess of $100,000 in the aggregate. (e) A savings bank may extend credit for commercial purposes to an affiliated person which may not exceed an aggregate of $100,000 except that the maximum for a director who is not employed by the savings bank may be the greater of $100,000 or 10% of the savings bank's net worth but not greater than $2,500,000. This extension of credit shall not involve more than the normal risk of collectibility or present other unfavorable features, and shall be at terms, amount, and interest rate substantially the same as those prevailing at the same time for comparable loans made to members of the general public of similar credit status. A savings bank shall comply with par. (d) with respect to any extensions of commercial credit exceeding an aggregate amount of $10,000. A savings bank shall, at the time of approval by the board of directors, notify the division of the transaction and all other outstanding extensions of commercial credit to the affiliated person.(f) No savings bank or subsidiary may invest, either directly or indirectly, in the stock, bonds, notes, or other securities of any affiliate of the savings bank.(g) No savings bank or subsidiary may, directly or indirectly, purchase securities under a repurchase agreement from any affiliate of the savings bank.(2) PROHIBITIONS ON LOAN TRANSACTIONS WITH THIRD PERSONS. No savings bank or subsidiary may, either directly or indirectly:(a) Make any loan to, or purchase other than through a secondary market such as the federal home loan mortgage corporation, any loan made to any third party on the security of real property purchased from any affiliate of the savings bank, unless the property was a single-family dwelling owned and occupied by the affiliated person as his or her principal residence;(b) Make a loan to, or purchase a loan made to, any third party secured by real property with respect to which any affiliate of the savings bank holds a security interest;(c) Accept the stock, bonds, notes, or other securities of any affiliate of the savings bank as security for a loan to any third party made or purchased by the savings bank or subsidiary;(d) Maintain a compensating balance with respect to a loan made by any third party to any affiliate of the savings bank; or(e) Enter into any guarantee arrangement or make any take-out commitment with respect to a loan made by any third party to any affiliate of the savings bank.(3) WAIVER. The restrictions in subs. (2) may be waived in supervisory cases if the division determines that the terms of the transaction in question are fair to, and in the best interests of, the savings bank or subsidiary. A "supervisory case" includes a merger instituted for compelling reasons of safety and soundness of a savings bank, and action taken pursuant to, or in order to obviate the necessity of, proceedings by the division under subch. XI of ch. 214, Stats.(4) RESTRICTIONS. No savings bank or subsidiary may, directly or indirectly, purchase or lease from, jointly own with or sell or lease to an affiliate of the savings bank any interest in real or personal property unless the transaction is determined by a majority of the savings bank's board of directors to be fair to, and in the best interest of, the savings bank or subsidiary.(5) CONDITIONS. Transactions permitted under sub. (4) shall: (a) Be supported by an independent appraisal not prepared by an affiliate, affiliated person, or employee of the savings bank or subsidiary; and,(b) Be approved in advance by a resolution indicating that the terms of the transactions are fair to, and in the best interests of, the savings bank or subsidiary. The resolution shall be adopted with full disclosure by at least a majority of the entire board of directors with no director having an interest in the transaction voting on the resolution of the savings bank or subsidiary or alternatively by a majority of the total votes eligible to be cast by the voting members of the savings bank at a meeting called for the purpose, with no votes cast by proxies not solicited for the purpose. In this subsection, "full disclosure" includes the affiliated person's source of financing for the real property involved in the transaction, including whether the savings bank or any subsidiary has a deposit relationship with any financial institution or holding company affiliate thereof providing the financing.Wis. Admin. Code Department of Financial Institutions DFI-SB 3.06
CR Register, February, 1994, No. 458, eff. 3-1-94; am. (1) (e), Register, October, 1996, No. 490, eff. 11-1-96.This rule parallels 12 CFR 563.43, an OTS regulation applying to savings and loan associations.