{"data":{"id":"us-ky/krs-286.3-280","jurisdiction":"us-ky","citation":"KRS 286.3-280","heading":"Maximum debt of persons to bank or trust company.","body":"(1) Except as provided in subsection (2) of this section:\n(a) Subject to paragraph (b) of this subsection, a bank or trust company shall not\npermit any person to become indebted to it or become obligated as guarantor\nor surety to it in an amount exceeding twen ty percent (20%) of the bank's or\ntrust company's capital stock actually paid in and actual amount of surplus,\nunless the person pledges, for any amount that exceeds the twenty percent\n(20%) limit, good collateral security or a mortgage upon real or person al\nproperty, which at the time is of more than the cash value of the indebtedness\nor obligation required to be secured under this paragraph above all other\nencumbrances;\n(b) In no event shall the indebtedness or obligation of any person exceed thirty\npercent (30%) of a bank's or trust company's capital stock actually paid in and\nactual amount of surplus; and\n(c) When computing the total of a bank's or trust company's capital stock actually\npaid in and actual amount of surplus, any negative balance of a bank 's or trust\ncompany's undivided profits account shall be deducted.\n(2) A bank or trust company may, in lieu of complying with subsection (1) of this\nsection, elect to comply with the legal lending limits applicable to national banks,\nas set forth in 12 U.S.C. sec. 84 and 12 C.F.R. pt. 32, as amended.\n(3) A bank or trust company shall not permit any of its directors or executive officers to\nbecome indebted to it or become obligated as guarantor or surety to it in an amount\nthat exceeds the amount that any ot her person is authorized by this section to\nbecome indebted or obligated to the bank or trust company.\n(4) In computing the indebtedness of any person:\n(a) The liability of any partnership in which the person acts as a general partner,\nand any obligation e ntered into for the benefit of a person, partnership, or\nassociation, shall be included in the total liabilities of the person, partnership,\nor association; and\n(b) 1. Any credit exposure arising from a derivative transaction, repurchase\nagreement, reverse purchase agreement, securities lending transaction,\nor securities borrowing transaction shall be included.\n2. For the purposes of this paragraph, the term \"derivative transaction\"\nincludes any transaction that is a contract, agreement, swap, warrant,\nnote, or option that is based, in whole or in part, on the value of, any\ninterest in, or any quantitative measure or the occurrence of any event\nrelating to, one (1) or mor e commodities, securities, currencies, interest\nor other rates, indices, or other assets.\n(5) Except as otherwise provided in this section, the same security, both in kind and\namount, shall be required from stockholders as from nonstockholders.\n(6) The dis count of bills of exchange drawn against actually existing value, and the\npurchase or discounting of commercial or business paper actually owned by the\nperson negotiating the paper, shall not be considered as borrowed money within the\nmeaning of this secti on in fixing the limit of indebtedness or obligation of any\nperson selling or negotiating the paper to a bank.\n(7) (a) Except as provided in paragraph (b) of this subsection, a bank shall not make\nany loan or discount on the security of, or be the purchase r or holder of, the\nshares of its own capital stock, or the shares of stock of a bank holding\ncompany that controls the bank, in an amount that exceeds the amounts\npermitted by 12 U.S.C. sec. 371c, as that section read on July 15, 1986.\n(b) A bank may take  property of any kind to satisfy or protect a loan previously\nmade in good faith and in the ordinary course of business.\n(c) Any stock purchased or acquired under paragraph (b) of this subsection that\nexceeds the amount permitted under paragraph (a) of thi s subsection shall,\nwithin six (6) months from the time of purchase or acquisition, be sold or\ndisposed of at public or private sale.\n(d) This subsection shall not be construed to affect or modify KRS 386.025.","path":[],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=55157","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:57:10Z","sha256":"ceb135de628a77eaffd328f0d8760c2bb1c51d366dde9b7b047911454eddfbf8","source_id":"us-ky","stale":false,"prev":"us-ky/krs-286.3-277","next":"us-ky/krs-286.3-290"},"notice":"GroundRules: Original legal text. Not legal advice."}