N.Y. Banking Law § 103: Restrictions on loans, purchases of securities and total liabilities to bank or trust company of any one person

§ 103.* Restrictions on loans, purchases of securities and total

liabilities to bank or trust company of any one person.

* NB Effective until notification of the superintendent of financial

services

* Restrictions on loans, purchases of securities, total liabilities

and other credit exposures to a bank or trust company of any one person.

* NB Effective upon notification of the superintendent of financial

services

No bank or trust company shall:

1. Lend to any person (which term shall mean, for the purposes of this

subdivision, any individual, partnership, unincorporated association,

corporation or body politic) an amount which will exceed fifteen per

centum of the capital stock, surplus fund and undivided profits of such

bank or trust company. Any extension of credit to a person by means of

the issue or confirmation of irrevocable sight letters of credit upon

the responsibility of such person, or by means of the discount or

purchase of, or investment in, bills of exchange, notes, bonds,

debentures or other obligations made, drawn or accepted by such person,

shall be considered a loan to such person for the purposes of this

subdivision except that (1) in the case of an accepted bill of exchange,

the loan shall be considered, subject to clause (2) below, to be made to

the acceptor and not to the drawer; and (2) if any bill of exchange,

note, bond, debenture or other obligation is endorsed without limitation

or guaranteed by any person and discounted with, or sold to, such bank

or trust company by such person, the loan shall be considered a loan to

such person and not to the maker, drawer or acceptor of such bill of

exchange, note, bond, debenture or other obligation. The foregoing

limitation is subject to the following exceptions:

(a) The limitations in this subdivision shall not apply to (1) any

loan to the extent that the United States, this state or any city,

county, town, village or school district of this state, or any

department, agency or instrumentality of the United States or this state

designated by the superintendent by general or specific regulation, has

agreed to pay the principal and interest thereof, or has guaranteed

payment (by guaranty or commitment to purchase or otherwise) of such

principal and interest, or is committed to supply, by loan, subsidy or

otherwise, funds sufficient to pay such principal and interest, or has

otherwise pledged its faith and credit for the payment of such principal

and interest; or (2) any loan secured by not less than a like amount

(based on their principal amount or market value, whichever is lower, at

the time the loan is made) of direct obligations of the United States or

of this state or of any city, county, town, village or school district

of this state or of any such department, agency or instrumentality of

the United States or this state or by obligations otherwise fully

guaranteed as to principal and interest by the United States.

(b) The limitations in this subdivision shall not apply to any loan to

the extent such loan is secured by cash collateral which is not subject

to withdrawal.

In addition, the limitations in this subdivision shall not apply (i)

to loans arising from the discount of commercial or business paper

evidencing an obligation to the person negotiating it with recourse;

(ii) to loans to the student loan marketing association; (iii) to loans

to any financial institution or to any receiver, conservator,

superintendent of financial services, or other agent in charge of the

business and property of such financial institutions when such loans are

approved by the superintendent; (iv) to the purchase of bankers'

acceptances of the kind described in section 13 of an act of congress

entitled the "Federal Reserve Act" and issued by other banking

corporations; and (v) to loans made to facilitate prompt clearance or

settlement arising from the purchase or sale of readily marketable

securities which loans (A) are secured by readily marketable securities

having a market value or a principal face amount (whichever is less) at

the time the loan is made of not less than the principal amount of said

loan, and (B) shall be required to be repaid upon settlement of such

purchase or sale.

(c) Loans (exclusive of any loan described in paragraph (a) of this

subdivision) to any state other than the state of New York, or to any

foreign nation, the New York State thruway authority, the Triborough

bridge and tunnel authority, The Port of New York Authority, a railroad

corporation, a municipal corporation of this state, a corporation

subject to the jurisdiction of a public service commission of this

state, or any international lending facility or public benefit

corporation designated by the superintendent by regulation, may equal

but not exceed twenty-five per centum of the capital stock, surplus fund

and undivided profits of such bank or trust company.

(d) Loans to any person, other than loans described in paragraph (a),

(b) or (c) of this subdivision, may equal but not exceed twenty-five per

centum of the capital stock, surplus fund and undivided profits of such

bank or trust company, provided such loans either in whole or in part,

but in any event that part thereof in excess of fifteen per centum of

such capital stock, surplus fund and undivided profits:

(1) are upon, or with respect to, drafts or bills of exchange drawn in

good faith against actually existing values, or upon bankers'

acceptances or bills of exchange of the kinds and maturities made

eligible by law for purchase in the open market by federal reserve

banks; or

(2) are secured by collateral having an ascertained market value, or

otherwise having a value as collateral as found in good faith by an

officer of such bank or trust company, at least equal to the excess of

such loans over fifteen per centum of such capital stock, surplus fund

and undivided profits.

(d-1) Loans secured by bills of lading, warehouse receipts, or similar

documents transferring or securing title to readily marketable staples

shall be subject to a limitation of thirty-five per centum of the

capital stock, surplus fund and undivided profits of such bank or trust

company in addition to the general limitations if the market value of

the staples securing each additional loan at all times equals or exceeds

one hundred fifteen per centum of the outstanding amount of such loan.

The staples shall be fully covered by insurance whenever it is customary

to insure such staples.

(d-2) Loans secured by shipping documents or instruments transferring

or securing title covering livestock or giving a lien on livestock when

the market value of the livestock securing the obligation is not at any

time less than one hundred fifteen per centum of the face amount of the

note covered, shall be subject to a maximum limitation equal to

twenty-five per centum of the capital stock, surplus fund and undivided

profits of such bank or trust company.

In addition, loans which arise from the discount by dealers in dairy

cattle of paper given in payment for dairy cattle, which paper carries a

full recourse endorsement or unconditional guarantee of the seller, and

which are secured by the cattle being sold, shall be subject to a

limitation of twenty-five per centum of the capital stock, surplus fund

and undivided profits of such bank or trust company.

(e) In computing the total loans by any bank or trust company (i) to

any individual, there shall be included all loans by the bank or trust

company to any partnership or unincorporated association of which he is

a member, and all loans made for his benefit or for the benefit of such

partnership or association; (ii) to any partnership or unincorporated

association, there shall be included all loans by the bank or trust

company to its individual members and all loans made by the bank or

trust company for the benefit of such partnership or unincorporated

association or any member thereof; and (iii) to any corporation, there

shall be included all loans made by the bank or trust company for the

benefit of the corporation. A loan shall be deemed to be made for the

benefit of a corporation only to the extent that the proceeds of such

loan (1) are to be loaned to the corporation; (2) are to be used for the

acquisition (otherwise than in connection with a public offering) from

the corporation by a person in control of, or under common control with,

the corporation, of any stock or other securities issued by the

corporation, or (3) are to be transferred to the corporation without

fair and adequate consideration, and the discharge of an equivalent

amount of debt previously incurred in good faith and for value shall be

considered fair and adequate consideration. A loan shall not be deemed

to be made for the benefit of a corporation if such loan is made to a

person other than the corporation and is secured as provided in

subdivision four of this section or is secured by collateral having an

ascertained market value, or otherwise having a value as collateral as

found in good faith by an officer of such bank or trust company, at

least equal to the amount of the loan; provided that stock or other

securities issued by, or a lien on property of, such corporation shall

not be considered collateral for the purposes of this provision.

(f) The limitations in this subdivision shall not apply to the

acceptance of bills of exchange or the issue or confirmation of letters

of credit calling for acceptances by a bank or trust company, but no

bank or trust company shall make acceptances, or issue letters of credit

calling for acceptances, upon the responsibility of any person to an

amount in excess of fifteen per centum of the capital stock, surplus

fund and undivided profits of such bank or trust company, unless that

part thereof in excess of fifteen per centum of such capital stock,

surplus fund and undivided profits is, and will remain, secured either

by accompanying documents or by some other actual security growing out

of the same transaction as the acceptance or by substituted security of

similar character.

(g) Loans arising from the discount of negotiable or non-negotiable

installment consumer paper which carries a full recourse endorsement or

unconditional guarantee by the transferor of such paper shall be subject

to a limitation of twenty-five per centum of the capital stock, surplus

fund and undivided profits of such bank or trust company. Within the

meaning of this subdivision, the liability to such bank or trust company

of any individual, partnership, unincorporated association or

corporation as endorser or guarantor of negotiable or non-negotiable

instalment consumer paper shall not be deemed a loan to such individual,

partnership, unincorporated association or corporation to the extent of

the value of the obligation thereon of the maker of such instalment

consumer paper, as found in good faith in writing by an officer of such

bank or trust company, designated to make such evaluation and

certification by the board of directors of the bank or trust company,

and upon the further certification by the said officer that the bank or

trust company is relying primarily on the maker of the instalment

consumer paper for the payment of an amount owing upon the instalment

consumer paper upon the security of which the bank or trust company is

making the loan or in which it is making the investment. The

certifications are to be made at the time of making the loan or

investment, and are to be based on information contained in the files of

the bank or trust company, or on the personal knowledge of the

designated officer. Instalment consumer paper, for the purposes of this

section, shall mean retail instalment contracts and retail instalment

obligations as defined in subdivisions six and six-a of section four

hundred ninety-one of this chapter, and similar agreements entered into

outside of this state.

(h) The limitations in this subdivision shall not apply to any advance

of federal funds by such bank or trust company to a commercial bank,

provided such advance is made on the condition that it be repaid on the

next business day following the day on which the advance is made. For

purposes of this paragraph, the term "federal funds" shall mean funds on

deposit at a federal reserve bank or funds on deposit at a commercial

bank which are exchangeable for funds on deposit at a federal reserve

bank; the term "commercial bank" shall mean any bank, trust company,

private banker, national banking association, any banking corporation

organized under the laws of the United States or any state of the United

States and engaged in a commercial banking business, or any banking

corporation organized under the laws of any foreign country and engaged

in the commercial banking business that maintains a branch or agency

licensed by any state of the United States or the comptroller of the

currency; and the term "business day" shall mean any day on which the

bank or trust company making the advance, the commercial bank obtaining

the advance and any federal reserve bank or banks through which such

advance was effected are all open for general business.

* (i) The limitations in this subdivision shall not apply to the

investment of such bank or trust company in the bonds, debentures, notes

or other obligations of any person, provided: (i) such bonds,

debentures, notes or other obligations mature not less than one year

after their respective dates of issuance, and, at the time of such

investment, are rated in one of the three highest rating grades by an

independent rating service designated by the superintendent of financial

services; (ii) such investment does not exceed fifteen per centum of the

capital stock, surplus fund and undivided profits of such bank or trust

company; and (iii) such investment complies with such additional

limitations and conditions as the superintendent of financial services

from time to time may prescribe by general regulation.

* NB Effective until notification of the superintendent of financial

services

* (i) The limitations in this subdivision shall not apply to the

investment of such bank or trust company in the bonds, debentures, notes

or other obligations of any person, provided: (i) such bonds,

debentures, notes or other obligations mature not less than one year

after their respective dates of issuance, and, at the time of such

investment, meet the standards of creditworthiness established by

regulation by the superintendent; (ii) such investment does not exceed

fifteen per centum of the capital stock, surplus fund and undivided

profits of such bank or trust company; and (iii) such investment

complies with such additional limitations and conditions as the

superintendent from time to time may prescribe by regulation.

* NB Effective upon notification of the superintendent of financial

services

* (j) In the case of a trust company which (1) does not receive

deposits from the general public and (2) has been exempted by the

superintendent of financial services from the requirements of section

thirty-two of this chapter, the limitations of this subdivision shall

not apply to the investment of such trust company in the bonds,

debentures, notes or other obligations of, any foreign nation, or any

political subdivision, agency or instrumentality thereof, provided: (i)

at the time of such investment, such bonds, debentures, notes or other

obligations are rated in one of the three highest rating grades by an

independent rating service designated by the superintendent of financial

services; (ii) for any such bonds, debentures, notes or other

obligations, the foreign nation, or any political subdivision, agency or

instrumentality thereof, has guaranteed payment (by guaranty or

commitment to purchase or otherwise) of such principal and interest, or

is committed to supply, by loan, subsidy or otherwise, funds sufficient

to pay such principal and interest, or has otherwise pledged its faith

and credit for the payment of such principal and interest; (iii) such

investments do not exceed the per centum applicable to such obligor of

the capital stock, surplus fund and undivided profits of such bank or

trust company as the superintendent shall approve, and (iv) such

investments comply with such limitations and conditions as the

superintendent may from time to time prescribe.

* NB Effective until notification of the superintendent of financial

services

* (j) In the case of a trust company which (1) does not receive

deposits from the general public and (2) has been exempted by the

superintendent from the requirements of section thirty-two of this

chapter, the limitations of this subdivision shall not apply to the

investment of such trust company in the bonds, debentures, notes or

other obligations of, any foreign nation, or any political subdivision,

agency or instrumentality thereof, provided: (i) at the time of such

investment, such bonds, debentures, notes or other obligations meet the

standards of creditworthiness established by regulation by the

superintendent; (ii) for any such bonds, debentures, notes or other

obligations, the foreign nation, or any political subdivision, agency or

instrumentality thereof, has guaranteed payment (by guaranty or

commitment to purchase or otherwise) of such principal and interest, or

is committed to supply, by loan, subsidy or otherwise, funds sufficient

to pay such principal and interest, or has otherwise pledged its faith

and credit for the payment of such principal and interest; (iii) such

investments do not exceed the per centum applicable to such obligor of

the capital stock, surplus fund and undivided profits of such bank or

trust company as the superintendent shall approve; and (iv) such

investments comply with such limitations and conditions as the

superintendent may from time to time prescribe.

* NB Effective upon notification of the superintendent of financial

services

* (k) In the case of a trust company which (1) does not receive

deposits from the general public and (2) has been exempted by the

superintendent of financial services from the requirements of section

thirty-two of this chapter, the limitations of this subdivision shall

not apply to the purchase of securities under repurchase agreement

provided that the repurchase agreement relates to not less than a like

amount of direct obligations (based on their principal amount or market

value, whichever is lower, at the time the purchase occurs) of any

foreign nation, or any political subdivision, agency or instrumentality

thereof, provided: (i) at the time of such purchase, such direct

obligations are rated in one of the three highest rating grades by an

independent rating service designated by the superintendent of financial

services; (ii) for any such direct obligations, the foreign nation, or

any political subdivision, agency or instrumentality thereof, has

guaranteed payment (by guaranty or commitment to purchase or otherwise)

of the principal and interest thereof, or is committed to supply, by

loan, subsidy or otherwise, funds sufficient to pay such principal and

interest, or has otherwise pledged its faith and credit for the payment

of such principal and interest; (iii) the purchase price of such

securities does not exceed the per centum applicable to the obligor of

such securities of the capital stock, surplus fund and undivided profits

of such bank or trust company as the superintendent shall approve; and

(iv) such purchase complies with such limitations and conditions as the

superintendent may from time to time prescribe.

* NB Effective until notification of the superintendent of financial

services

* (k) In the case of a trust company which (1) does not receive

deposits from the general public and (2) has been exempted by the

superintendent from the requirements of section thirty-two of this

chapter, the limitations of this subdivision shall not apply to the

purchase of securities under repurchase agreement provided that the

repurchase agreement relates to not less than a like amount of direct

obligations (based on their principal amount or market value, whichever

is lower, at the time the purchase occurs) of any foreign nation, or any

political subdivision, agency or instrumentality thereof, provided: (i)

at the time of such purchase, such direct obligations meet the standards

of creditworthiness established by regulation by the superintendent;

(ii) for any such direct obligations, the foreign nation, or any

political subdivision, agency or instrumentality thereof, has guaranteed

payment (by guaranty or commitment to purchase or otherwise) of the

principal and interest thereof, or is committed to supply, by loan,

subsidy or otherwise, funds sufficient to pay such principal and

interest, or has otherwise pledged its faith and credit for the payment

of such principal and interest; (iii) the purchase price of such

securities does not exceed the per centum applicable to the obligor of

such securities of the capital stock, surplus fund and undivided profits

of such bank or trust company as the superintendent shall approve; and

(iv) such purchase complies with such limitations and conditions as the

superintendent may from time to time prescribe.

* NB Effective upon notification of the superintendent of financial

services

* The superintendent of financial services shall be empowered to

promulgate rules and regulations as shall be appropriate to carry out

the purposes of this subdivision.

* NB Effective until notification of the superintendent of financial

services

* The superintendent shall be empowered to promulgate rules and

regulations as shall be appropriate to carry out the purposes of this

subdivision.

* NB Effective upon notification of the superintendent of financial

services

* The superintendent also shall be authorized to determine the manner

and extent to which credit exposure resulting from derivative

transactions, repurchase agreements, reverse repurchase agreements,

securities lending transactions and securities borrowing transactions

shall be taken into account for purposes of this section. As used in

this section, the term "derivative transaction" includes any transaction

that is a contract, agreement, swap, warrant, note or option that is

based, in whole or in part, on the value of, any interest in, any

quantitative measure of, or the occurrence of any event relating to, one

or more commodities, securities, currencies, interest or other rates,

indices or other assets. In making such determinations, the

superintendent may, but is not required to, act by order or regulation.

* NB Effective upon notification of the superintendent of financial

services

4. Make a loan upon the security of real estate within or without this

state which does not comply with any such rules or regulations as the

superintendent of financial services may prescribe.

No loan shall be made under the provisions of this subdivision except

upon the written and signed certificate of an appraiser appointed

pursuant to policies established by the board of directors, certifying

to the value of the premises according to his judgment.

The provisions of this subdivision shall not constitute the authority

to make a loan to a natural person upon the security of a mortgage which

is not a first lien.

Where the collateral for any loan consists partly of real estate

security and partly of other security, including a guarantee or

endorsement by or an obligation or commitment of a person other than the

borrower, only the amount by which the loan exceeds the value as

collateral of such other security, as found in good faith by a duly

authorized officer of such bank or trust company, at the time of the

making of the loan or commitment therefor, shall be considered a loan

upon the security of real estate, provided, that in no event shall a

loan be considered a loan upon the security of real estate (i) where the

principal amount of any real estate security taken therefor is less than

fifteen per centum of the amount of such loan or (ii) where the loan is

payable in monthly or quarterly installments over a period not to exceed

one hundred twenty-one months and does not exceed twenty thousand

dollars and is for the purpose of paying the cost of any repairs,

alterations or improvements upon, or in connection with, or, as the

superintendent may authorize, the equipping of existing structures or

the building of new structures by the owners thereof or by the lessees

under a lease expiring not less than six months after the maturity of

the loan or (iii) where the loan is fully guaranteed or insured by the

United States or a state, or any department, agency or instrumentality

thereof, and for the payment of which loan the full faith and credit of

the United States or of such state is pledged and if under the terms of

the guaranty or insurance agreement the bank or trust company will be

assured of repayment in accordance with the terms of the loan or (iv)

where there is a binding and valid commitment or agreement by a

financially responsible lender, purchaser or other financially

responsible party either directly with the lending bank or trust company

or which is for the benefit of, or has been assigned to, the lending

bank or trust company and pursuant to which commitment, agreement or

assignment, the lender, purchaser or other party is required to advance

to the lending bank or trust company within thirty months from the date

of such commitment or agreement the full amount of the loan to be made

by the lending bank or trust company upon the security of real estate

improved by a building or buildings, or to be improved by a building or

buildings in the process of construction, the major portion of which

building is used, or in the case of a building under construction is to

be used, for residential, business, manufacturing or agricultural

purposes, and where pursuant to the terms and provisions of such

commitment or agreement such advance shall be made prior to or upon the

maturity of the loan by the lending bank or trust company.

Real estate security for purposes of this section shall not include

(a) an assignment of rents under a lease, (b) a mortgage or other lien

upon a leasehold, (c) a mortgage or other lien upon leasehold, royalty

or other rights in oil, gas, minerals, standing timber, or other

products of land, (d) a mortgage or other lien made or given upon real

estate and taken as collateral security for loans to a borrower,

provided, that at the time of the making of the loan or commitment

therefor, repayment thereof is reasonably expected to be made out of the

operations of such borrower or of the mortgagor, or (e) such mortgages

or other liens on property as may be specifically exempted from the

limitations and restrictions of this subdivision by the superintendent

of financial services by general or specific regulations. Nothing in

this paragraph shall be construed to imply that security of a kind not

mentioned herein is to be deemed real estate security.

The limitations and restrictions contained in this subdivision shall

not prevent the acceptance of any real estate security to secure the

payment of a debt previously contracted in good faith. Every mortgage

and every assignment of a mortgage taken or held by such bank or trust

company shall immediately be recorded or registered in its name in the

office of the clerk or the proper recording officer of the county in

which the real estate described in the mortgage is located, except that

where the underlying real estate is located outside the state of New

York such mortgage or assignment may be recorded or registered in the

name of a duly authorized nominee, and except that if such mortgage or

assignment of mortgage or of an interest therein shall be taken from a

corporation organized under the banking law or all of the capital stock

of which is owned by not less than twenty savings banks of this state,

the bank or trust company may hold such mortgage or assignment

unrecorded unless the superintendent shall direct the bank or trust

company to record the same. The recording or registering of assignments

of mortgages shall not be required when not less than ten mortgages are

assigned as security for a loan, the term of which does not exceed

twelve months.

Any bank or trust company may renew from time to time any loan upon

the security of real estate lawfully made by it prior to June thirtieth,

nineteen hundred thirty-seven.

None of the prohibitions and restrictions contained in this

subdivision shall apply to any corporation all of the capital stock of

which is owned by not less than twenty savings banks of this state.

4-a. A bank or trust company may, in addition to the authority granted

under any other provisions of this article, make a loan to a natural

person upon the security of a mortgage which is not a first lien at the

rate or rates agreed to by the bank or trust company and the borrower,

subject to such regulations as the superintendent of financial services

may prescribe. Such regulations by the superintendent of financial

services may include such restrictions as the superintendent of

financial services finds necessary or proper, including without

limitation, a restriction as to the percentage of total assets which may

be invested in such loans or a restriction on the loan to appraisal

value of property securing such loan.

For purposes of this subdivision, the term mortgage shall include a

lien on an existing ownership interest in certificates of stock or other

evidence of an ownership interest in, and a proprietary lease from, a

corporation or partnership formed for the purpose of the cooperative

ownership of real estate.

5. Make any loan for the purpose of financing the purchase of or

refinancing an existing ownership interest in certificates of stock or

other evidence of an ownership interest in, and a proprietary lease

from, a corporation or partnership formed for the purpose of the

cooperative ownership of real estate, unsecured except to the extent of

an assignment or transfer of the stock certificates or other evidence of

ownership interest of the borrower and the proprietary lease within

ninety days from the making of the loan, which shall exceed the maximum

per cent of the loan permitted to be made on real estate improved by a

single family residence occupied by the owner, provided that for

purposes of this section the amount of the purchase price shall be

deemed to equal the appraised value of such certificate of stock or

other evidence of an ownership interest, or, in the case of a

refinancing, the appraised value of such certificates of stock or other

evidence of an ownership interest and which shall fail to provide for

full repayment of principal and interest within the same number of years

as a conventional mortgage loan previously described in this

subdivision, provided that all real estate owned by such corporation or

partnership shall be located within the state; and provided, further,

that such loan shall be subject to such regulations as the

superintendent of financial services may from time to time promulgate.

The maximum rate of interest which may be charged, taken or received

upon any loan or forbearance made pursuant to this subdivision may

exceed the rate of interest prescribed by the superintendent of

financial services in accordance with section fourteen-a by no more than

one and one-half per centum per annum.

6. Make any loan or discount on the security of the shares of its own

capital stock, or, except as provided in section five thousand twelve of

this chapter, be the purchaser of any such shares, unless such security

or purchase shall be necessary to minimize or avoid loss upon a debt

previously contracted in good faith, and stock so purchased shall be

sold at public or private sale, or otherwise disposed of, within six

months from the time of its purchase unless the superintendent shall

authorize such bank or trust company in writing to hold such shares for

a longer period. Any bank or trust company violating any of the

provisions of this subdivision shall forfeit to the people of the state

twice the amount of the loan or purchase.

7. Knowingly lend, directly or indirectly, any money or property for

the purpose of enabling any person to pay for or hold shares of its

stock, unless the loan is made upon security having an ascertained

market value of at least fifteen per centum more than the amount of the

loan. Any bank or trust company violating the provisions of this

subdivision shall forfeit to the people of the state twice the amount of

the loan.

8. Except in conformity with such rules and regulations as may be

promulgated by the superintendent, lend any sum of money to any

executive officer or director of such bank or trust company. The

superintendent shall have power to determine by regulation who shall be

considered, under the provisions of this subdivision, to be an executive

officer and what shall be considered, under the provisions of this

subdivision, to be a loan to an executive officer or director. In making

such determination, the superintendent shall have power to include or

exclude, subject to such conditions and limitations, if any, as he shall

prescribe, any or all of the following: (1) any transaction as a result

of which an executive officer or director of a bank or trust company

becomes obligated to such bank or trust company upon any note, draft,

bill of exchange or other indebtedness, as maker, drawer, endorser,

guarantor, surety or otherwise; and (2) any transaction as a result of

which a corporation, in which an executive officer or director or any

combination of such persons, owns or controls a majority of the stock,

or as a result of which a partnership in which an executive officer or

director is a partner, becomes obligated or renews its obligation to

such bank or trust company upon any note, draft, bill of exchange or

other indebtedness, as maker, drawer, endorser, guarantor, surety or

otherwise. Every bank or trust company violating this provision or any

regulation issued pursuant thereto and every officer or director of such

bank or trust company knowingly participating in such violation shall,

for each offense, forfeit to the people of the state twice the amount of

the loan.

No executive officer or director of a bank or trust company shall

borrow from the bank or trust company of which he is an executive

officer or director except as permitted by this section.