§ 1491 Bank Loan Security Restrictions

No loan shall be made by any commercial bank upon the securities of one or more corporations, the payment of which loan is undertaken, in whole or in part, severally, but not jointly, by two or more persons in any of the following circumstances: (a) If the borrowers or underwriters are obligated absolutely or contingently to purchase the securities, or any of them, collateral to the loan, unless the borrowers or underwriters have paid on account of the purchase of the securities an amount in cash, or its equivalent, equal to at least 25 percent of the several amounts for which they remain obligated in completing the purchase of the securities. (b) If the commercial bank making the loan is liable, directly or indirectly, or contingently, for the repayment of the loan or any part thereof. (c) If its term, including any renewal thereof by agreement, express or implied, exceeds the period of one year. (d) Or to an amount under any circumstances in excess of 25 percent of the sum of the commercial bank’s shareholders’ equity, allowance for loan losses, capital notes, and debentures. (Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)