OCC Revises Lending Limits Rule to Include Derivatives and Securities Financing Transactions

On June 20, 2012, the Office of the Comptroller of the Currency issued an interim final rule that implements Section 610 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 610 expanded the range of transactions subject to lending limits applicable to national banks under the National Bank Act to include credit exposures arising from derivative transactions, as well as from repurchase and reverse repurchase agreements and securities lending and borrowing transactions. The rule also makes a number of technical changes that expand the scope of the current rule’s exclusion for loans to affiliates and subsidiaries of a bank and consolidate the lending limits rules applicable to savings associations with those applicable to national banks.

The changes made to implement Section 610 could have significant implications for many financial institutions if the rule is finalized in its current form. The attached memorandum discusses the key considerations raised by the rule and describes the provisions in the rule for calculating credit exposure from derivative transactions and securities financing transactions.