P.R. Laws tit. 7, § 764
The Bank shall not make to the same person, whether natural or [juridical], one or more loans aggregating more than fifteen percent (15%) of its paid-in capital and reserve fund, nor shall it accept the security of any one person, firm, partnership, or corporation in an amount exceeding fifteen percent (15%) of its paid-in capital and reserve fund. In the case of loans to cooperatives, the Bank may grant up to twenty percent (20%) of the paid-in capital and reserve fund, or the total therein invested in shares or savings of the cooperative, whichever is greater.
This restriction shall not apply to loans or discounts secured by collateral worth at least twenty-five percent (25%) more than the amount of the loan, nor to the discount of bills of exchange, provided such loans so secured by said collaterals and such discounts of bills of exchange issued under such conditions do not exceed thirty-three and one-third percent (33 1 / 3 %) of the Bank’s paid-in capital plus its reserve fund, including the loans and discounts referred to in the first part of this section, nor to the discount of drafts or bills of exchange or commercial acceptances with a maturity date not exceeding six (6) months, and which are the result of transactions involving the importing or exporting of articles of commerce from or to foreign countries, or which result from transactions involving the shipping of articles of commerce within the jurisdictional limits of the Commonwealth of Puerto Rico or to the continental United States or its territories and possessions; nor to loans which are wholly secured by bonds, securities and other evidences of indebtedness of the Government of the United States or of the Government of the Commonwealth of Puerto Rico, or by current debt bonds, not in default, of the authorities, instrumentalities or dependencies of the Government of the Commonwealth of Puerto Rico or of the municipalities of Puerto Rico. In the application of these restrictions the total amount of the loans and discounts made to any one person, firm, or corporation, plus the loans on which the same person, firm, or corporation, is guarantor, shall not exceed, in all, the thirty-three and one-third percent (33 1 / 3 %) above mentioned. When the loan is secured by mortgage on real property, the total sum of such loans shall not exceed the Bank’s total amount of paid-in capital and reserve fund, nor the total of its deposits in savings accounts and term accounts, whichever is larger. These restrictions shall not apply to the purchase by the Bank of drafts or notes accepted by banks under the provisions of subsection (g) of § 761 of this title, or to loans secured by a collateral of sugar in warehouse, or to the discount of bills of exchange with their shipping documents covering sugar, provided the total amount of such loans made to one same natural or juridical person does not exceed fifty percent (50%) of the Bank’s paid-in capital plus its reserve fund. The Commissioner of Financial Institutions may, in case of emergency, reduce or increase the said fifty percent (50%).
Any violation by the Bank of the provisions of §§ 763—765 of this title shall be sufficient reason for the Commissioner to impose an administrative fine on it of not less than five hundred dollars ($500) nor more than the total amount of interest which such loans or discounts may have yielded the Bank, from the date on which said violation occurred, or in the discretion of the Commissioner, for the cancellation of its license.
Every partnership or corporation, and its affiliates shall be deemed a single person, partnership, or corporation, when:
(a) A corporation owns more than fifty percent (50%) of the total capital stock of another corporation or fifty percent (50%) of the voting stock thereof.
(b) A partnership owns more than fifty percent (50%) of the capital stock of a corporation, or when it owns more than fifty percent (50%) of the voting stock of such corporation.
(c) A natural person owns more than fifty percent (50%) of the capital stock of a corporation or more than fifty percent (50%) of the voting stock thereof.
(d) A natural person owns more than fifty percent (50%) of the total capital of a partnership.
The Bank shall not, during the first three (3) years of its operation, invest in loans and discounts a sum exceeding its available capital plus fifty percent (50%) of the depositors’ money, with the exception of the deposits of public funds secured by collateral. For the purposes of this paragraph, the term “available capital” means the total paid-in capital plus the reserve fund minus the book value of the Bank building and its accessories and any other real property belonging to the Bank. For the application of this provision, due regard shall be given to unexpected withdrawals of funds by depositors. In the course of these first three (3) years, and as circumstances may warrant, the Commissioner may authorize an increased proportion of loans in relation to deposits. The remainder of fifty percent (50%) of the depositors’ money, or the resulting remainder if the Commissioner authorizes an increased proportion of loans in relation to deposits, shall remain in the Bank as a reserve in cash or in short-term debentures of the federal government, the Government of Puerto Rico, its instrumentalities, or of any municipality of Puerto Rico. Any director or manager of the 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 five hundred dollars ($500) nor more than one thousand dollars ($1,000) for the first violation, and in the case of a second or subsequent violation he shall be guilty of a misdemeanor and upon conviction, shall be punished by a fine of not less than one thousand dollars ($1,000) or by imprisonment for a term of not more than two (2) years, or by both penalties, in the discretion of the court.
The Bank may grant loans secured by its own stock. In the event that the Bank comes into possession of these shares through default in the payment of the loan granted, it shall be bound to dispose of them at a public or private sale within one (1) year from the date of acquisition. The Commissioner may grant a longer term for the liquidation of such securities.
Neither the Bank nor any of its directors, officers, agents, or employees may purchase or be directly or indirectly interested in purchasing any promissory note or other negotiable instrument issued by the Bank for a lesser sum than that for which it is drawn, or for less than the market value thereof.
Any employee or director of the Bank may obtain a loan or make discounts therein as a debtor, drawer, acceptant, endorser, maker, or guarantor. This kind of loan shall be governed by the provisions of §§ 1 et seq. of this title, known as the “Banking Law of Puerto Rico”.
The provisions of this section do not apply to the cases in which the transactions are carried out between the Bank and Cooperative Union that own stock issued by the Bank.
History —June 21, 1966, No. 88, p. 257, § 14; Sept. 25, 1992, No. 79, § 7.