Lending limit exception for participations not limited to banks. Non-banks may act as participants. (07/25/96)

Office of the Comptroller of the Currency

Interpretive Letter #736

Published in Interpretations and Actions August 1996

12 U.S.C. 84D2H

July 25, 1996

[ ]

Dear [ ]:

This letter responds to your July 1, 1996, request regarding the [ ] ("Bank"). Specifically, you inquired

whether 12 CFR 32.2(j)(2)(vi)(B), which addresses the purchase of loan participations by banks, applies

equally to participations purchased by non-banks.

Although section 32.2(j)(2)(vi)(B) specifically states that "participating banks" must provide their

funding within one business day of the originating bank's funding of a loan, the OCC did not intend to

limit this exception to bank participants alone. The purpose of the participation exception to the lending

limit rule is to ensure that a sale of a portion of a loan by an originating bank relieves that bank from the

credit risks associated with the loan. It is irrelevent to whom that credit risk is passed, as long as the bank

has complied with the restrictions of the rule.

Therefore, it is my opinion that if the Bank otherwise complies with section 32.2(j)(2)(vi), the Bank's

sale of a loan participation to a non-bank will reduce its legal lending limit exposure to the original

borrower.

I trust this has been responsive to your inquiry.

Very truly yours,

/s/

Laura G. Goldman

Attorney

Bank Activities & Structure Division

Interpretive Letter #736