Vermont § 14301 - Loan authority

§ 14301. Loan authority

• (a) General loan authority. Unless otherwise prohibited by State law, a Vermont financial institution may make,
  sell, purchase, arrange, participate in, invest in, or otherwise deal in loans, derivative
  transactions, or extensions of credit for any lawful purpose. (b) Written loan policy. (1) A financial institution’s governing body shall establish a written loan, credit, and
  derivative transaction policy, as applicable to the activities of the financial institution,
  which shall be reviewed and ratified at least annually, that addresses at a minimum,
  the following: (A) loan portfolio mix and diversification standards and, if applicable, derivative transaction
  portfolio mix and diversification standards; (B) prudent underwriting standards, including loan-to-value limits that are clear and
  measurable; (C) loan administration procedures, including delegation and individual lending officer
  authority; and (D) documentation and approval requirements to monitor compliance with lending policies. (2) The policies adopted pursuant to this section shall be consistent with safe and sound
  banking practices and appropriate to the size of the institution and nature and scope
  of its operations. (c) Interest on loans. Financial institutions may demand and receive interest and charges on their loans
  in accordance with 9 V.S.A. chapter 4 or as otherwise provided by law. (d) Limitations. A Vermont financial institution may not make loans, derivative transactions, or extensions
  of credit outstanding at one time to a borrower in excess of 20 percent of its capital.
  Total loans, derivative transactions, or other extensions of credit in excess of 10
  percent of capital shall be approved by a majority of the governing body or the executive
  committee of that institution or organization. (1) Loans, derivative transactions, or extensions of credit to one person will be attributed
  to another person and each person shall be deemed a borrower as follows: (A) In the case of obligations of one person, the proceeds will be deemed to be used for
  the direct benefit of another person and will be attributed to the other person when
  the proceeds, or assets purchased with the proceeds, are transferred to another person,
  other than a bona fide arm’s length transaction where the proceeds are used to acquire
  property, goods, or services. (B) In the case of obligations of a partnership or association, the obligations of each
  general partner and of each member of the association. (C) In the case of obligations of a general partner or a member of an association, the
  obligations of the partnership or association. (D) In the case of obligations of a corporation, the obligations of any subsidiaries in
  which it holds, directly or indirectly, a controlling equity interest. (E) In the case of obligations of a limited liability company, the obligations of any
  subsidiaries in which it holds, directly or indirectly, a controlling equity interest. (F) In the case of obligations of a corporation or limited liability company, the amount
  of a loan made to any other person to the extent that the proceeds of the loan directly
  or indirectly are to be: (i) loaned to the corporation or limited liability company; (ii) used for the acquisition from the corporation or limited liability company of any
  equity interest in the corporation or company; and (iii) transferred to the corporation or limited liability company without fair and adequate
  consideration; provided, however, that the discharge of an equivalent amount of debt
  previously incurred in good faith for value shall be deemed fair and adequate consideration. (2) The following shall not be counted as indebtedness subject to the limitation of this
  subsection: (A) Indebtedness evidenced by bills of exchange or drafts drawn against existing values
  and secured by a lien upon goods in transit with shipper’s order, bills of lading,
  or comparable instruments attached. (B) Indebtedness evidenced by notes or other paper secured by readily marketable corporate
  stock having a fair market value of not less than 125 percent of the indebtedness. (C) Indebtedness evidenced by notes or other paper secured by an assignment of accounts
  receivable or of amounts due to become due on open account or on a contract to the
  extent of not less than 125 percent of the indebtedness. (D) Indebtedness evidenced by notes or other paper secured by liens upon agricultural
  products, manufactured goods, or other chattels in storage in warehouses or elevators
  with warehouse or elevator receipts attached, or goods released on trust receipts,
  when the value of the security is not less than 125 percent of the indebtedness and
  the financial institution’s interest is insured against loss by insurance policies
  or certificates of insurance attached. (E) Indebtedness arising out of the daily transaction of the business of any clearing
  house association. (F) Indebtedness secured to the extent thereof by the cash surrender value of life insurance
  evidenced by policies of insurance validity issued and assigned. (G) Indebtedness secured to the extent thereof by savings deposits or certificates of
  deposit of solvent financial institutions up to the amount insured by the Federal
  Deposit Insurance Corporation, and duly assigned. (H) Any portion of any indebtedness that the U.S. government, or an agency or instrumentality
  of the United States, unconditionally agreed to purchase or has unconditionally guaranteed
  as to payment of both principal and interest, including loans insured or guaranteed
  under the National Housing Act or the Servicemen’s Readjustment Act of 1944, as amended. (I) Additional funds advanced for the benefit of a borrower by a financial institution
  for payment of taxes, insurance, utilities, security, and maintenance and operating
  expenses necessary to preserve the value of real property securing the loan. (J) Amounts paid against uncollected funds in the normal process of collection. (K) That portion of a loan or extension of credit sold as a participation by a financial
  institution on a nonrecourse basis, provided that the participation results in a pro
  rata sharing of credit risk proportionate to the respective interests of the originating
  and participating lenders. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001; amended 2011, No. 78 (Adj. Sess.), § 26, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.), § 297, eff. July 1, 2022.)