rules of department of insurance, financial institutions ... csr 1140-2.020 legal reserves ......

CODE OF STATE REGULATIONS 1ROBIN CARNAHAN (9/30/06)Secretary of State

Rules of

Department of Insurance,Financial Institutions andProfessional RegistrationDivision 1140—Division of Finance

Chapter 2—Banks and Trust Companies

Title Page

20 CSR 1140-2.020 Legal Reserves...............................................................................3

20 CSR 1140-2.030 Agricultural Credit Corporation ..........................................................3

20 CSR 1140-2.035 Purchase of Federal Home Loan Bank Stock by State-Chartered Banks ..........3

20 CSR 1140-2.040 Reserve Requirements/Unimpaired Capital .............................................4

20 CSR 1140-2.050 Disposition of Credit Insurance Income.................................................4

20 CSR 1140-2.051 Insurance Agencies Operated by State-Chartered Banks .............................4

20 CSR 1140-2.053 Fees Per Section 408.052, RSMo ........................................................5

20 CSR 1140-2.055 Purchase of Bank Owned Life Insurance ...............................................5

20 CSR 1140-2.060 Investment in Fixed Assets ................................................................6

20 CSR 1140-2.065 Bank Investment in Real Estate Development Corporations .........................6

20 CSR 1140-2.067 Community Development Corporations .................................................7

20 CSR 1140-2.070 Accounting for Other Real Estate ........................................................7

20 CSR 1140-2.080 Legal Loan Limit ...........................................................................8

20 CSR 1140-2.081 Legal Loan Limit—Limited Partnerships ...............................................8

20 CSR 1140-2.082 Legal Loan Limit as Amended by HB 408 .............................................9

20 CSR 1140-2.090 Originating Trustees ........................................................................9

20 CSR 1140-2.095 Standards for Certain Fiduciary Investments .........................................14

20 CSR 1140-2.100 Reports of Condition (Call Reports)....................................................14

2 CODE OF STATE REGULATIONS (9/30/06) ROBIN CARNAHAN

Secretary of State

20 CSR 1140-2.110 Management and Other Fees Paid by State-Chartered Banks ......................14

20 CSR 1140-2.120 Identification of Branches ................................................................15

20 CSR 1140-2.126 Branch Banking ............................................................................15

20 CSR 1140-2.127 Branch Banking—ATMs..................................................................25

20 CSR 1140-2.130 Securities Activities .......................................................................25

20 CSR 1140-2.138 Financial Subsidiaries .....................................................................25

20 CSR 1140-2.140 Preservation of Books and Records.....................................................26

20 CSR 1140-2.150 Lease Financing Limited Partnerships .................................................28

Title 20—DEPARTMENT OFINSURANCE, FINANCIAL

INSTITUTIONS ANDPROFESSIONAL REGISTRATION

Division 1140—Division of FinanceChapter 2—Banks and Trust Companies

20 CSR 1140-2.020 Legal Reserves

PURPOSE: The Monetary Control Act of1980 (Title I of H.R. 4986) and correspond-ing regulations impose, for the first time,reserve requirements which must be met bystate nonmember banks. Those reserverequirements ignore and, in many cases, con-flict with the reserve provisions of Missouristate law. Those conflicts render computationof reserves by state nonmember banks undulyburdensome and, in many cases, these con-flicts place state nonmember banks at a dis-advantage with member banks as to theamount of reserves which must be kept. Thisinequality suggests the need for an alterationin the interpretation of state policy onreserves. It is believed that this rule providesthe alteration needed and that this proposal isjustified on a number of grounds. Reserverequirements imposed by state law are notdesigned for monetary purposes and, there-fore, have been commonly considered to beheld for liquidity purposes. However, to thedegree that they are needed to pay incomingcash letters and other obligations and to com-pensate for correspondent services, thedemand balances due from other banks are,in reality, the least liquid assets of a com-mercial bank. Furthermore, balances wouldbe maintained at fairly constant levels even inthe absence of reserve requirements. TheMonetary Control Act of 1980 and Regula-tions A and D suggest that a bank’s short-term liquidity needs are to be satisfiedthrough the money markets, established bor-rowing sources and the Federal Reserve dis-count window. A reduction in the officiallyrequired level of reserves will not adverselyaffect the liquidity of any bank. In addition,the inequality between state and nationalbanks deriving from the Monetary ControlAct suggests the need for action on the part ofthe commissioner of finance and the StateBanking Board under section 362.105.3,RSMo to eliminate the disadvantage accruingto state nonmember banks. Some equality inthe area of reserves appears to have been theintention of the general assembly as evi-denced by sections 362.215 and 362.217,RSMo. Indeed, under the latter section, thetreatment accorded by this rule appears tohave been mandated by the general assemblysince, for reserve purposes, all state-char-tered banks have been inducted into the Fed-

eral Reserve System. Finally, although noexpress language is contained in the Mone-tary Control Act of 1980, the conflictsbetween that Act and the Missouri reserverequirements suggest the possibility that thestate reserve requirements have been legallypreempted and are of no further effect.

(1) A bank or trust company may satisfy therequirements of sections 362.210 and362.215, RSMo by maintaining that amountof reserves and in the form as it is directed tokeep by the Federal Reserve Bank located inthe district in which the bank or trust compa-ny is located. For purposes of this rule andsection 362.225.2, RSMo, the FederalReserve Banks located in this state are desig-nated as approved depositories for all banksand trust companies.

AUTHORITY: sections 361.105, RSMo 1986and 362.105.3, RSMo Supp. 1992.* This ruleoriginally filed as 4 CSR 140-2.020. Emer-gency rule filed Sept. 26, 1980, effective Nov.1, 1980, expired Feb. 28, 1981. Original rulefiled Sept. 26, 1980, effective Feb. 28, 1981.Moved to 20 CSR 1140-2.020, effective Aug.28, 2006.

*Original authority: 361.105, RSMo 1967 and 362.105.3,RSMo 1939, amended 1949, 1963, 1965, 1967, 1977,1983, 1986, 1990, 1991, 1992.

20 CSR 1140-2.030 Agricultural CreditCorporation

PURPOSE: To the extent that a state-char-tered bank or trust company has the ability toform an agricultural credit corporation capa-ble of making loans to farmers and ranchersfor agricultural purposes and discountingthese loans to the Federal Intermediate Cred-it Bank in its district, that bank or trust com-pany will be better able to serve the creditneeds of its community. National banks areauthorized by federal law (12 U.S.C. 24(7))to form these corporations. State charteredbanks and trust companies should be grantedthe same power to permit them to competewith their federally-chartered counterparts.

(1) A bank or trust company, subject to theprovisions of this rule, may invest in the stockof an agricultural credit corporation.

(2) An agricultural credit corporation is acorporation whose stock is owned entirely byone (1) or more banking organizations andwhich is formed solely to make loans to farm-ers and ranchers for agricultural purposes.

(3) A bank which owns less than eighty per-cent (80%) of the stock of an agriculturalcredit corporation shall—

(A) Not invest in the stock of an agricul-tural credit corporation more than an amountequal to its legal loan limit; and

(B) Obtain the approval of the commis-sioner of finance before investing in the stockof an agricultural credit corporation.

(4) No bank or trust company or agriculturalcredit corporation, eighty percent (80%) ormore of whose voting stock is owned by abank or trust company, shall extend credit toany borrower if the aggregate of all exten-sions of credit to that borrower, by the bankand its agricultural credit corporations, willexceed the bank’s legal loan limit.

AUTHORITY: sections 361.105, RSMo 1986,362.105.3, RSMo Supp. 1992 and 362.170,RSMo Supp. 1989.* This rule originally filedas 4 CSR 140-2.030. Original rule filed July15, 1981, effective Oct. 15, 1981. Moved to20 CSR 1140-2.030, effective Aug. 28, 2006.

*Original authority: 361.105, RSMo 1967; 362.105.3,RSMo 1939 amended 1949, 1963, 1965, 1967, 1977,1983, 1986, 1990, 1991, 1992; and 362.170, RSMo 1939,amended 1941, 1943, 1945, 1959, 1963, 1967, 1977,1981, 1983, 1985, 1986, 1989.

20 CSR 1140-2.035 Purchase of FederalHome Loan Bank Stock by State-Char-tered Banks

PURPOSE: National banks are permitted topurchase shares in federal home loan banksand have access to the loan funds availablethrough the federal home loan bank system;that gives national banks a competitiveadvantage. This rule restores competitiveequality by permitting state-chartered banksto purchase shares in the Federal Home LoanBank of Des Moines.

(1) Any state-chartered bank may purchasethe minimum number of shares of stock nec-essary to become a member of and to borrowfrom the Federal Home Loan Bank of DesMoines; provided, however, that in no casemay that purchase be in an amount whichexceeds the bank’s legal lending limit.

AUTHORITY: section 362.105.3, RSMoSupp. 1992.* This rule originally filed as 4CSR 140-2.035. Original rule filed April 16,1991, effective Aug. 30, 1991. Moved to 20CSR 1140-2.035, effective Aug. 28, 2006.

*Original authority: 362.105.3, RSMo 1939, amended1949, 1963, 1965, 1967, 1977, 1983, 1986, 1990, 1991,1992.


Chapter 2—Banks and Trust Companies 20 CSR 1140-2

20 CSR 1140-2.040 Reserve Requirements/Unimpaired Capital

PURPOSE: Senate Bill 331, which was effec-tive September 28, 1983, changed the defini-tion of “unimpaired capital” as it appears insection 362.170, RSMo, by deleting the word“capital” from the phrase “capital reserves.”This rule indicates that state-chartered banksmay include the amount in “allowance forpossible loan losses,” as reflected in theirofficial report of condition (Call Report), inthe calculation of “unimpaired capital” forlegal loan limit purposes. This inclusion givesstate-chartered banks loan limit parity withnational banks.

(1) When calculating unimpaired capital forlegal loan limit purposes, banks and trustcompanies, effective September 28, 1983,may add the line designated as allowance forpossible loan losses on the bank’s officialreport of condition (Call Report) to thoselines previously permitted: “total equity cap-ital” and “capital notes.”

(2) The allowance for possible loan losseswill not be considered unimpaired capital forpurposes of capital adequacy.

AUTHORITY: sections 361.105, RSMo 1986and 362.170, RSMo Supp. 1989.* This ruleoriginally filed as 4 CSR 140-2.040. Origi-nal rule filed Aug. 15, 1983, effective Nov.11, 1983. Amended: Filed Aug. 18, 1987,effective Nov. 12, 1987. Moved to 20 CSR1140-2.040, effective Aug. 28, 2006.

*Original authority: 361.105, RSMo 1967; and 362.170,RSMo 1939, amended 1941, 1943, 1945, 1959, 1963,1967, 1977, 1981, 1983, 1985, 1986, 1989.

20 CSR 1140-2.050 Disposition of CreditInsurance Income

PURPOSE: The practice in state-charteredbanks where persons or entities other thanthe bank receive compensation for the sale ofcredit life or credit accident and health insur-ance can be an unsafe and unsound bankingpractice in that it tends to erode the fiducia-ry relationship between that person or entityand the bank, encourages the making of loanswhich are imprudent and may lead to unduepressuring of borrowers to purchase insur-ance. This rule assures that the bank receivesthe benefit from the sale of credit life or cred-it accident and health insurance to loan cus-tomers.

(1) Definitions.

(A) Bank means a state-chartered bank ortrust company.

(B) Interest shall include:1. Ownership through a spouse or minor

child(ren);2. Ownership through a broker, nominee

or agent; or3. Ownership through a corporation,

partnership, association, joint venture or pro-prietorship controlled by a director, officer,employee or principal shareholder of thebank.

(C) Principal shareholder means any shareholder who, directly or indirectly, owns orcontrols an interest of more than five percent(5%) in the bank’s outstanding shares.

(D) The terms officer, director, employeeand principal shareholder shall include thespouse and minor child(ren) of that officer,director, employee or principal shareholder.

(2) Distribution of Credit Life and CreditAccident and Health Insurance Income.

(A) Except as provided in subsection(2)(B) of this rule, no bank employee, officer,director or principal shareholder may retainor receive commissions or other income fromthe sale of credit life or credit accident andhealth insurance in connection with any loanmade by the bank, nor receive or retain anybonus, salary, premium or other compensa-tion contingent upon sales of credit life orcredit accident and health insurance. Thisincome must be paid directly to the bank ortrust company, to a trust of which the benefi-ciaries are entitled to share the proceeds inexact proportion to their ownership of thebank or trust company, to a holding companywhich owns all of the stock of the bank oftrust company except for directors’ qualifyingshares or to an affiliate of that bank which isalso wholly owned by the bank’s holdingcompany.

(B) Notwithstanding the prohibition con-tained in subsection (2)(A), bank employeesand officers may participate in a bonus orincentive plan under which payments basedon credit life insurance sales are made in cashor in kind out of the bank’s funds not morefrequently than quarterly and in an amountnot exceeding in any one (1) year, five per-cent (5%) of the recipient’s annual salary.Alternatively, bonuses paid to any one (1)individual during the year for credit life salesmay not exceed five percent (5%) of the aver-age salary of all loan officers participating inthe plan and may not be paid more frequent-ly than quarterly. All compensation underthis rule shall be by board resolution whichshall contain sufficient detail to permit adetermination that the limits of this rule havenot been exceeded. Copies of this resolu-

tion(s) shall be maintained separately forreview by the Division of Finance.

(3) Responsibilities of Directors. The selec-tion of an insurance company and the agree-ments between the company and the bankshall be approved by an appropriate resolu-tion of the bank’s board of directors.

AUTHORITY: section 361.105, RSMo 1986.*This rule originally filed as 4 CSR 140-2.050. Original rule filed July 15, 1981,effective Jan. 1, 1982. Amended: Filed Feb.25, 1986, effective June 1, 1986. Moved to20 CSR 1140-2.050, effective Aug. 28, 2006.

*Original authority: 361.105, RSMo 1967.

20 CSR 1140-2.051 Insurance AgenciesOperated by State-Chartered Banks

PURPOSE: National banks in places withpopulations of five thousand persons or fewerare permitted by virtue of the National Bank-ing Act to operate insurance agencies whichcan sell all types of insurance. State-char-tered banks have not been given specificauthority for this activity leaving them at acompetitive disadvantage especially wherestate and national banks occupy the sameplace with populations of five thousand per-sons or fewer. Expanding the authority willserve the public by providing convenientinsurance services at competitive prices. Thisrule also clarifies permissible insurance-related activities for banks located in placeswith populations over five thousand. Section362.105, RSMo explicitly empowers thedirector of finance, with the approval of theState Banking Board, to issue rules grantingpowers and authorities to state-charteredbanks which would give competitive equalitywith federally-chartered institutions. Thisrule authorizes insurance agencies in state-chartered banks on the same basis as nation-al banks are authorized.

PUBLISHER’S NOTE: The secretary of statehas determined that the publication of theentire text of the material which is incorpo-rated by reference as a portion of this rulewould be unduly cumbersome or expensive.Therefore, the material which is so incorpo-rated is on file with the agency who filed thisrule, and with the Office of the Secretary ofState. Any interested person may view thismaterial at either agency’s headquarters orthe same will be made available at the Officeof the Secretary of State at a cost not toexceed actual cost of copy reproduction. Theentire text of the rule is printed here. Thisnote refers only to the incorporated by refer-ence material.


Secretary of State

20 CSR 1140-2—DEPARTMENT OF INSURANCE,FINANCIAL INSTITUTIONS ANDPROFESSIONAL REGISTRATION Division 1140—Division of Finance

(1) State-chartered banks or their facilities inany place having a population of five thou-sand (5,000) persons or fewer according to thelast decennial census are authorized to oper-ate insurance agencies to the extent nationalbanks are so authorized by 12 U.S.C. 92.

(2) A state-chartered bank may lease a por-tion of its premises to insurance agents oragencies. Where the lease involves an officer,director, employee affiliate or principalshareholder as defined in 4 CSR 140-2.050,those lease arrangements may not be for aperiod longer than one (1) year and must pro-vide reasonable compensation to the bank; aminimum of twenty percent (20%) of thecommissions generated shall be consideredreasonable. A full accounting of the calcula-tion of that compensation must be made toand approved by the bank’s board of directorsat the board’s organization meeting followingthe annual stockholders’ meeting; the detailsof the compensation, including gross com-missions received by the agency, the portionreceived by the bank as compensation, andany fees or other payments made by the agen-cy to the officers, directors, and principalshareholders, shall be entered into theboard’s minutes and disclosed to the share-holders at the annual shareholders’ meeting.

(3) Income from the sale of any credit-relat-ed insurance shall be treated as though itwere income from the sale of credit life insur-ance according to 4 CSR 140-2.050.

AUTHORITY: sections 361.105, RSMo 1986and 362.105, RSMo Supp. 1992.* This ruleoriginally filed as 4 CSR 140-2.051. Origi-nal rule filed June 12, 1984, effective Nov.11, 1984. Moved to 20 CSR 1140-2.051,effective Aug. 28, 2006.

*Original authority: 361.105, RSMo 1967; 362.105,RSMo 1939, amended 1949, 1963, 1965, 1967, 1977,1983, 1986, 1990, 1991, 1992.

20 CSR 1140-2.053 Fees Per Section408.052, RSMo

PURPOSE: This rule draws attention to theprovisions of section 408.052, RSMo as theyrelate to fees taken by insiders in connectionwith real estate secured loans.

PUBLISHER’S NOTE: The secretary of statehas determined that the publication of theentire text of the material which is incorpo-rated by reference as a portion of this rulewould be unduly cumbersome or expensive.Therefore, the material which is so incorpo-rated is on file with the agency who filed this

rule, and with the Office of the Secretary ofState. Any interested person may view thismaterial at either agency’s headquarters orthe same will be made available at the Officeof the Secretary of State at a cost not toexceed actual cost of copy reproduction. Theentire text of the rule is printed here. Thisnote refers only to the incorporated by refer-ence material.

(1) Section 408.052, RSMo, which concernsloans secured by first mortgages on residen-tial real estate, prohibits a lender from charg-ing, requiring or receiving fees of any naturewith certain exceptions. Those exceptionsinclude actual expenses paid to any person orentity other than an officer, employee ordirector of the lender or a business in whichan officer, employee or director owns anysubstantial interest. Accordingly, a bank maynot make a separate identifiable charge to acustomer for any services performed by it orany of its officers, directors or employees orany business in which any officer, director oremployee has a substantial interest.

(2) It should be noted that P.L. 96-221, 12U.S.C. 1735f-7 eliminated the limitation onthe number of points as well as interest rateswhich may be assessed on first mortgage res-idential real estate loans which are federallyrelated mortgages. As all Missouri banks areinsured by the Federal Deposit InsuranceCorporation (FDIC), all first mortgage resi-dential real estate loans made by Missouribanks, by definition, are federally related.Accordingly, it would be acceptable for abank to permit services, such as abstract andappraisal services, to be performed by anofficer, director or employee or business inwhich these persons hold a substantial inter-est and then add the cost to the points so thatthe finance charge and annual percentage ratereflect these costs. In this way, no separateidentifiable charge is assessed and section408.052, RSMo will not be violated, in ouropinion.


*Original authority: 361.105, RSMo 1967 and 408.052,RSMo 1974, amended 1979, 1989.

20 CSR 1140-2.055 Purchase of BankOwned Life Insurance

PURPOSE: The Division of Finance routine-ly receives inquiries about the purchase of life

insurance. Some bankers indicate they haveconsidered purchasing life insurance policiesand treating the cash surrender value as asignificant portion of the bank’s capitalaccount. A bank may, within the bank’s inci-dental powers, purchase life insurance rea-sonably related to a legitimate bank interest.A bank may not purchase life insurance forinvestment purposes. This rule sets guidelinesfor the purchase of bank owned life insur-ance.

(1) The powers and authorities of banks andtrust companies (bank) are set out in section362.105, RSMo. This statute is specific inthe type of investments authorized by banksand it does not include the purchase of lifeinsurance for the bank’s own account as aninvestment. Accordingly, any purchase ofinsurance is allowed only if it is within theincidental powers of a bank or it is reasonablyrelated to a legitimate bank interest such asthe interest in protecting itself against loss.

(2) A bank may purchase life insurance toindemnify itself against the loss of key man-agement personnel. The amount of insurancepurchased must be reasonable in relation tothe size and needs of the bank. Also, theboard of directors must document the basisupon which it determines who qualifies to becovered by the insurance. The board mustdocument the basis for determining theamount of insurance needed to indemnify thebank against the death of each individual.The bank must document and be able todemonstrate an insurable interest and a legit-imate insurance need when insuring a keyperson. The authority to hold such a policylapses if, because of a change in employmentstatus or responsibilities, the individual is nolonger considered a key person.

(3) A bank may purchase life insurance inconjunction with providing employee com-pensation and benefits or when the insuranceis paid in part to the bank and to the employ-ee, which is commonly referred to as splitdollar insurance. A bank may also purchaselife insurance in connection with an employ-ee compensation and benefit plan. Thebank’s funding obligation must be reasonableand the projected cash flow from a life insur-ance policy must not substantially exceed theprojected liabilities to fund the compensationor benefit program. Such life insurance poli-cies may be held only so long as the bank’sliability under the associated compensation orbenefit plan continues.

(4) A bank may purchase, at the bank’sexpense, insurance on the life of a borrower



to protect its interest in the event of the deathof the borrower. The maximum amount ofinsurance should not exceed the principal bal-ance of the borrower’s obligation. Similarly,a bank may take security interest in an exist-ing policy. In no event may the bank’s deci-sion to make a loan be based on the avail-ability of the insurance proceeds forrepayment of the loan.

(5) Accounting for bank owned life insurancepolicies must be consistent with the require-ments of generally accepted accounting prin-ciples. However, in no event may a bankcarry the value of that policy as an asset onits books in an amount which exceeds thecurrent cash surrender value of the policy.

(6) The cash surrender value of the policyrepresents funds due from a corporation andtherefore may not exceed the limit on loans toone (1) borrower set by section 362.170,RSMo. The legal loan limit also will apply tothe aggregate book value of all policies,including subsequent earnings, which arepurchased from the same company. The bankshould examine the financial condition of theinsurance company before purchasing thepolicy and maintain access to and periodical-ly review recent financial statements of theinsurance company. Finally, if the aggregatecash surrender value of all these policiesowned by the bank is large in relation to thebank’s total capital account, these amountswill be considered a concentration of credit.

AUTHORITY: sections 361.105, RSMo 2000and 362.105, RSMo Supp. 2001.* This ruleoriginally filed as 4 CSR 140-2.055. Origi-nal rule filed Aug. 22, 1991, effective Feb. 6,1992. Amended: Filed Jan. 16, 2003, effec-tive Aug. 30, 2003. Moved to 20 CSR 1140-2.050, effective Aug. 28, 2006.

*Original authority: 361.105, RSMo 1967, amended1993, 1994, 1995 and 362.105, RSMo 1939, amended1949, 1963, 1965, 1967, 1977, 1983, 1986, 1990, 1991,1992, 1995, 2000, 2001.

20 CSR 1140-2.060 Investment in FixedAssets

PURPOSE: Section 362.105.1(9), RSMorequires banks and trust companies to obtainthe approval of the commissioner of financebefore acquiring real estate for use as bankpremises. The Division of Finance has con-sistently followed two informal policies underthis statute. First, a bank is normallyrequired to limit its investment in fixed assetsto fifty percent of its capital accounts. Sec-ond, a bank seeking to expend funds to

remodel, refurnish or reequip its existingbanking premises has been required to obtainapproval from the commissioner. This ruleformalizes the former policy and modifies thelatter policy.

(1) An application under section362.105.1(9), RSMo to purchase real proper-ty ordinarily will be approved if the appli-cant’s investment in fixed assets, includingreal estate, building and furniture and fix-tures, after the proposed expenditure, will beless than fifty percent (50%) of its unim-paired capital as defined in section 362.170,RSMo. Each application will be decided afteran analysis of safety and soundness factorsincluding capital, assets, management, earn-ings and liquidity.

(2) Investments in programs to remodel pre-viously acquired bank premises or to pur-chase furniture or equipment for use in thebank’s premises will not require the approvalof the commissioner unless the aggregate ofall investment in fixed assets, including realestate, building, furniture and fixtures, afterthe planned investment, will exceed fifty per-cent (50%) of unimpaired capital as definedin section 362.170, RSMo.

(3) Whether or not an application is requiredas described above, no bank or trust com panymay, without the approval of the commission-er, make any acquisition of real propertywhich will result in its investment in fixedassets exceeding fifty percent (50%) of itsunimpaired capital.

AUTHORITY: sections 361.105, 362.170 and362.105, RSMo Supp. 1995.* This rule orig-inally filed as 4 CSR 140-2.060. Originalrule filed Dec. 10, 1981, effective April 1,1982. Amended: Filed Sept. 15, 1995, effec-tive March 30, 1996. Moved to 20 CSR 1140-2.060, effective Aug. 28, 2006.

*Original authority: 361.105, RSMo 1967; 362.105,RSMo 1939, amended 1949, 1963, 1965, 1967, 1977,1983, 1986, 1990, 1991, 1992, 1995; and 362.170, RSMo1941, amended 1943, 1945, 1959, 1963, 1967, 1977,1981, 1983, 1985, 1989, 1993, 1994, 1995.

20 CSR 1140-2.065 Bank Investment inReal Estate Development Corporations

PURPOSE: Senate Bill 52 was approved bythe governor and took effect on September28, 1985. The bill amended section 362.106,RSMo to permit banks and trust companies tomake certain investments in real estate devel-opment corporations. This rule establishesguidelines under section 362.106, RSMo

which permit banks and trust companies tomake certain investments in real estate devel-opment corporations and clarifies unclearprovisions of the law.

PUBLISHER’S NOTE: The secretary of statehas determined that the publication of theentire text of the material which is incorpo-rated by reference as a portion of this rulewould be unduly cumbersome or expensive.Therefore, the material which is so incorpo-rated is on file with the agency who filed thisrule, and with the Office of the Secretary ofState. Any interested person may view thismaterial at either agency’s headquarters orthe same will be made available at the Officeof the Secretary of State at a cost not toexceed actual cost of copy reproduction. Theentire text of the rule is printed here. Thisnote refers only to the incorporated by refer-ence material.

(1) For purposes of this rule, a real estatedevelopment corporation (REDC) shall meanany corporation whose activities are limitedto managing or owning agricultural property,subdividing and developing real property andbuilding residential housing or commercialimprovements on that property and owning,renting, leasing, managing, operating forincome and selling property which the REDChas developed and improved.

(2) A bank may invest in the stock of anREDC; provided—

(A) Within thirty (30) days of investing,the bank advises the office of the commis-sioner of finance of the name of the REDC,the amount of this investment and relatedloans, lines of credit and guarantees and thelocation and general description of the princi-pal projects of the REDC;

(B) The REDC shall not engage in a jointventure with any executive officer or princi-pal shareholder of the bank or any relatedinterest of the bank as those terms are definedin Regulation O of the Federal Reserve Board(12 CFR 215);

(C) The bank’s total of investments andextensions of credit in all REDCs shall notexceed five percent (5%) of the bank’s assets;

(D) The bank’s total equity investment inany one (1) real estate project shall notexceed twenty percent (20%) of its unim-paired capital; for purposes of this subsec-tion, the investments in all REDC joint ven-tures on a given project shall be aggregated;

(E) The real estate owned by the REDCshall be located—1) in the same county or a


Secretary of State


county adjoining that county where the mainbanking house of the bank is located or 2) inthe bank’s local community as defined by theCommunity Reinvestment Act (12 U.S.C.2901); provided, however, that this real estatemay be located anywhere in Missouri or inany state adjoining Missouri with the priorapproval of the director of the Division ofFinance; and

(F) The REDC shall obtain proper docu-mentation and perfected security interests onall projects.

(3) Subject to the provisions of section (4) ofthis rule, a bank may extend credit up to itslegal loan limit to each REDC in which it hasinvested.

(4) Extensions of credit by a bank to anREDC shall be subject to the attribution andaggregation rules contained in 4 CSR 140-2.080.

(5) A bank’s investment in an REDC will besubject to the same review standards as anyother investment. Examiners will be review-ing for solvency of the corporation and allother factors which might be pertinent todetermining the value of the investment.

AUTHORITY: sections 361.105, RSMo 1986,362.106, RSMo Supp. 1990 and 362.170,RSMo Supp. 1989.* This rule originally filedas 4 CSR 140-2.065. Original rule filed Aug.2, 1985, effective Oct. 11, 1985. Amended:Filed June 12, 1990, effective Nov. 30, 1990.Moved to 20 CSR 1140-2.065, effective Aug.28, 2006.

*Original authority: 361.105, RSMo 1967; 362.106,RSMo 1981, amended 1985, 1990; and 362.170, RSMo1939, amended 1941, 1943, 1945, 1959, 1963, 1967,1977, 1983, 1985, 1986, 1989.

20 CSR 1140-2.067 Community Develop-ment Corporations

PURPOSE: Senate Bill 688 of the 86th Gen-eral Assembly added subdivision (14) to sub-section 1. of section 362.105, RSMo autho-rizing banks to make limited investments incommunity development corporations. Thisrule sets guidelines for these investments.

(1) A bank or trust company may invest in thedebt or equity instruments of a communitydevelopment corporation. Unless this invest-ment meets the requirements of section (2) ofthis rule, it should be treated as a charitablecontribution and charged off the bank’sbooks.

(2) A bank may carry an investment as isdescribed in section (1) as an asset on itsbooks; provided—

(A) The total amount invested by the bankin any one (1) community development cor-poration project does not exceed two percent(2%) of the bank’s unimpaired capital and theaggregate amount invested by the bank’sunimpaired capital and the aggregate amountinvested by the bank in all these projects doesnot exceed five percent (5%) of the bank’sunimpaired capital; and

(B) The project must be of civic, commu-nity or public nature and should not be exclu-sively private or entrepreneurial.

AUTHORITY: sections 361.105, RSMo 2000and 362.105.1, RSMo Supp. 2001.* This ruleoriginally filed as 4 CSR 140-2.067. Emer-gency rule filed May 20, 1992, effective June1, 1992, expired Sept. 29, 1992. Emergencyrule filed Sept. 10, 1992, effective Sept. 29,1992, expired Jan. 26, 1993. Emergency rulefiled Jan. 15, 1993, effective Jan. 27, 1993,expired May 8, 1993. Original rule filed July30, 1992, effective Feb. 26, 1993. Amended:Filed Feb. 15, 2002, effective Aug. 30, 2002.Moved to 20 CSR 1140-2.067, effective Aug.28, 2006.

*Original authority: 361.105, RSMo 1967, amended1993, 1994, 1995 and 362.105.1, RSMo 1939, amended1949, 1963, 1965, 1967, 1977, 1983, 1986, 1990, 1991,1992, 1995, 2000, 2001.

20 CSR 1140-2.070 Accounting for OtherReal Estate

PURPOSE: For years this division hasrequired banks and trust companies to chargeoff other real estate over a period of six years.The policy was based on an incorrect inter-pretation of section 362.165, RSMo. Thisrule replaces that policy with one requiringbanks and trust companies to account forother real estate in a manner which conformsto generally accepted accounting principles.

(1) For the purposes of this rule, other realestate shall include real property which ispurchased by the bank under judicial or non-judicial foreclosure where the real propertywas security for debts previously contracted,which is purchased by the bank to protect itsinterest in debts previously contracted, whichis acquired by the bank in partial or completesatisfaction of debts previously contracted, orwhich is owned by the bank and which hasbeen, but is no longer, used or intended to beused as bank premises.

(2) Other real estate should be booked oraccounted for at the lower of—a) the bookvalue of the real estate (or the loan to whichit is attributable, plus allowable expenses andless any previous direct write-down unearnedinterest) or b) the fair market value of the realproperty at the date of the transfer to that cat-egory. Where the other real estate isattributable to debts previously contracted,any excess of the bank’s investment in theloan over the fair market value of the realproperty must be charged against the reservefor loan losses. Additional charge-offs afterforeclosure should be charged to other oper-ating expenses. Examiners may classify anyportion of the other real estate carried on thebank’s books.

(3) At the time real property is transferred tothe other real estate category, if the recordedvalue of the real estate exceeds two hundredfifty thousand dollars ($250,000), the bankshall obtain a current appraisal prepared byan independent qualified appraiser to sub-stantiate the fair market value of the realproperty; provided that if such property has arecorded value of two hundred fifty thousanddollars ($250,000) or less, an evaluation shallbe performed and placed in file. For purpos-es of this section, the evaluation must: a) bein writing; b) be dated; c) describe the realestate, its condition, and both current andprojected use; d) list the sources of informa-tion; e) describe analysis and supportinginformation; f) give an estimate of marketvalue based, as appropriate, on cost andincome, and any limiting conditions; and g)provide the name, address, and signature ofpreparer, who must have real estate trainingor experience, knowledge of the market andhave been independent of the loan decision.For the purpose of this section, the bank willbe considered to be in compliance if—a) thebank has obtained an appraisal or evaluation,as appropriate, within six (6) months prior toacquisition or b) within thirty (30) days afterforeclosure, the bank has documented anagreement with an individual or company toperform the appraisal or evaluation, as appro-priate; however, the appraisal or evaluation,as appropriate, shall be completed and in thebank’s files within ninety (90) days of fore-closure.

AUTHORITY: sections 361.105 and 362.165,RSMo 2000 and 362.105, RSMo Supp.2001.* This rule originally filed as 4 CSR140-2.070. Original rule filed Dec. 10,1981, effective April 1, 1982. Amended:Filed May 17, 1988, effective Aug. 26, 1988.Amended: Filed Jan. 12, 1993, effective June7, 1993. Amended: Filed Dec. 29, 2000,



effective Aug. 30, 2001. Amended: Filed Feb.15, 2002, effective Aug. 30, 2002. Moved to20 CSR 1140-2.070, effective Aug. 28, 2006.

*Original authority: 361.105, RSMo 1967 amended 1993,1994, 1995; 362.105, RSMo 1939, amended 1949, 1963,1965, 1967, 1977, 1983, 1986, 1990, 1991, 1992, 1995,2000, 2001; and 362.165, RSMo 1939,amended 1967,1983, 1995.

20 CSR 1140-2.080 Legal Loan Limit

PURPOSE: Section 362.170, RSMo limits theamount which may be loaned to “any individ-ual, partnership, corporation, or bodypolitic.” Section 362.170.2(c), RSMorequires that certain loans be aggregated forthe purpose of determining whether the limiton loans to a certain entity has been exceed-ed. Thus, the law states that liabilities of anindividual, partnership or corporation mustbe aggregated with all loans made for thebenefit of that individual, partnership or cor-poration. This office will attempt to effectuatethe strong public policy evidenced by the lawwhich is to prevent a bank from becomingoverextended to any single concern. Recently,we have witnessed several departures fromthis public policy and sound banking princi-ples with potentially disastrous results. Inorder to comply with this section of law, abank must know which loans should be aggre-gated and treated as a single line of creditand which loans may be treated separately.This rule establishes some guidelines forcompliance with the statute and formalizesthe existing policy of the Division of Finance.

(1) Rule. The obligations of two (2) or morecorporations, partnerships or individuals, ora combination, shall be aggregated pursuantto the following guidelines:

(A) If the proceeds of loans to two (2) ormore entities were used for the benefit of asingle individual or enterprise, the loans shallbe aggregated; and

(B) If two (2) or more entities are effec-tively operating as separate departments ordivisions of a single enterprise, loans to theseentities shall be aggregated.

(2) Factors. The decision to aggregate two (2)or more loans under this rule shall be madeafter considering all relevant factors, includ-ing the following:

(A) The extent to which the loans are madeto borrowers controlled by the same share-holder or group of shareholders;

(B) The degree to which the bank is rely-ing on a single entity as the source of repay-ment;

(C) The degree to which one (1) individu-al, or small group of individuals, dominatesmanagement decisions of two (2) or moreborrowers;

(D) The proportionate dependence of one(1) borrower upon another as a market for, orsupplier of, goods or services;

(E) The extent to which proceeds of a loanto one (1) obligor will flow to the obligor ofother loans; and

(F) The degree to which repayment of one(1) loan is secured by or dependent uponmoneys to be paid by the obligor of otherloans.

(3) Examples.(A) Corporation A derives all of its income

from the production of sausage. Its entire pro-duction is sold each year to corporation Bwhose income is one hundred percent (100%)derived from the retail marketing of thissausage. A is B’s sole supplier of thissausage. A and B are owned or controlled bythe same individual or group of individuals.The Division of Finance would treat A and Bas a single enterprise and loans to A would beaggregated with loans to B to determine com-pliance with the legal loan limit.

(B) A and B corporations are owned by thesame individuals but operated independently.A is engaged in the dental supply businessand B is exclusively engaged in farm machin-ery. A loan to A would not be attributed to Bunless the proceeds were loaned or paid overto B by A or unless the bank looks primarilyto one (1) corporation for repayment of bothdebts.

(C) One (1) individual owns three (3) cor-porations which are primarily engaged in theconstruction business. Corporation A holdstitle to real estate (a warehouse), corporationB holds title to construction equipment andcorporation C is an operating company whichborrows for inventory, receivables, payroll(work in progress). Loans to these three (3)corporations would be combined since theyare effectively operating as separate depart-ments or divisions of a single enterprise.

(D) Corporation A has substantial indebt-edness and needs additional capital funds.Corporation B is formed by the principals ofcorporation A for the single purpose ofacquiring certain assets from corporation Aand leasing them back to A. The Division ofFinance would treat A and B as a singleenterprise and loans to A would be aggregat-ed with loans to B to determine compliancewith the legal loan limit.

(E) Assume all the same facts that are setforth in subsection (3)(D), with the exceptionthat the entity acquiring the property to beleased back is a large independent corpora-

tion in the leasing business. Loans to B wouldnot be attributed to A if it is determined thesale lease back is an arms-length businesstransaction.

(F) An individual borrows money to pur-chase stock or indebtedness in a closely heldcorporation. The credit would be attributed tothe corporation if the corporation, directly orindirectly, receives the proceeds and if therewere no source of repayment other than thesuccessful operation of the corporation.

(G) Assume the same situation as set forthin subsection (3)(F), except the loan to theindividual is secured by readily marketablestock of a publicly held corporation. Obliga-tions of individuals which are secured byreadily marketable securities of a publiclyheld corporation will not be aggregated withindebtedness of the corporation which issuedthe securities.

(4) Effect on Existing Credit. This rule, untilJanuary 1, 1984, shall not affect any credit inexistence on September 11, 1982 which,absent this rule, would have been in compli-ance with the previous policy toward attribu-tion of loans; provided that an extension toJanuary 1, 1985 may be obtained from theDivision of Finance upon the bank’s demon-stration, in writing, that an undue hardshipwould result.

AUTHORITY: sections 361.105, RSMo 1986and 362.170, RSMo Supp. 1989.* This ruleoriginally filed as 4 CSR 140-2.080. Origi-nal rule filed June 14, 1982, effective Sept.11, 1982. Moved to 20 CSR 1140-2.080,effective Aug. 28, 2006.

*Original authority: 361.105, RSMo 1967 and 362.170,RSMo 1939, amended 1941, 1943, 1945, 1959, 1963,1967, 1977, 1981, 1983, 1985, 1986, 1989.

20 CSR 1140-2.081 Legal Loan Limit—Limited Partnerships

PURPOSE: This rule removes the confusionsurrounding the legal loan limit as it relatesto limited partnerships and certain joint ven-tures, eliminates any lingering effects of ear-lier interpretations (rulings number 19 and37) and states this division’s policy towardthis subject.

(1) While loans to general partnerships shallbe considered, for legal loan limit purposes,loans to each member of the partnership, thisrule does not apply to limited partners in lim-ited partnerships unless limited partners actas general partners by undertaking duties orresponsibilities associated with running thebusiness.


Secretary of State




(2) This rule shall not be construed to limitattribution which would be required by appli-cation of 4 CSR 140-2.080 Legal LoanLimit.

(3) A corporation or other entity serving as ageneral partner in any limited or general part-nership shall be attributed any loan made toor for the benefit of the partnership.



20 CSR 1140-2.082 Legal Loan Limit asAmended by HB 408

PURPOSE: Effective September 28, 1985section 362.170, RSMo was amended by HB408. This rule restates the law and declaresthis office’s position concerning the amend-ment.

(1) The Legal Loan Limit as Amended. Sec-tion 362.170, RSMo provides that the legalloan limits will not apply to loans “. . . to theextent they are secured by a segregateddeposit account in the lending bank if thelending bank has obtained a perfected securi-ty interest in such account.” Stated different-ly, a bank does not count against its legal loanlimit the portion of any loan which is onehundred percent (100%) secured by a per-fected security interest in deposits in thebank. For example, consider a bank with aone (1) million dollar legal loan limit. If aborrower pledges a certificate of deposit(CD) in the lending bank in the amount ofone hundred thousand dollars ($100,000), thebank could lend up to one million one hun-dred thousand dollars (the one (1) millionlegal loan limit plus the one hundred thou-sand dollars ($100,000) which is fullysecured by the CD).

(2) Perfected Security Interest. In order toexpand the legal loan limit per the amend-ment of section 362.170, RSMo, the bankmust perfect the security interest. This willordinarily require actual possession of anyCDs or passbooks and the bank will beexpected to complete any other steps in theperfection process.

AUTHORITY: sections 361.105, RSMo 1986and 362.170, RSMo Supp. 1989.* This ruleoriginally filed as 4 CSR 140-2.082. Origi-nal rule filed Aug. 2, 1985, effective Oct. 11,1985. Moved to 20 CSR 1140-2.082, effec-tive Aug. 28, 2006.


20 CSR 1140-2.090 Originating Trustees

PURPOSE: Section 362.116, RSMo permitsa state-chartered bank, with the approval ofthe commissioner of finance, to become anoriginating trustee which can originate trustaccounts to be administered by a bank ortrust company with full fiduciary powers,known as the contracting trustee. This rulesets out the information which the commis-sioner will require of an applicant anddeclares the criteria the commissioner willuse in considering the application.

(1) Application. Applications for the com-missioner’s approval to become an originat-ing trustee are available from the offices ofthe Division of Finance, P.O. Box 716, Jef-ferson City, MO 65102. The application willrequire, as minimum information, the nameand address of the applicant institution, thename of the employee of the applicant insti-tution who will be designated as trust officer,the name and address of the proposed con-tracting trustee, a certified copy of the con-tracting trustee’s authorization to act as atrustee, a copy of the contract between theoriginating trustee and the contracting trusteeand a copy of the board resolution calling forthe establishment of the contract.

(2) Criteria. In considering an application tobecome an originating trustee, the commis-sioner will consider the following:

(A) Whether the contracting trustee issupervised by either a state or federal bankregulatory agency; and

(B) Whether termination provisions in thecontract will protect the customer which, forpurposes of this rule, shall mean the grantor,known beneficiaries or any other interestedparty. These provisions shall include pro-hibiting termination unless—1) a successortrustee has accepted appointment as trustee,2) the customer has rescinded the trust, 3) acourt has appointed a successor trustee or 4)any other provision providing comparableprotections.

(3) Affidavit of Originating Trustees. Uponrequest of the contracting trustee, the origi-

nating trustee may provide an affidavitdeclaring that the contracting trustee hasauthority to act concerning a specific trust.The affidavit shall be signed by an officer ofthe originating trustee and shall be in essen-tially the following form: (Name of Officer),first being sworn, states that s/he is an officerin (Name of Originating Trustee) which hasauthority to act as originating trustee per sec-tion 362.116, RSMo, and that said institutionhas contracted with (Name of ContractingTrustee) to provide trust services in connec-tion with the trust of (Name of Trust). Fur-ther affiant saith not.

AUTHORITY: sections 361.105 and 362.116,RSMo 1986.* This rule originally filed as 4CSR 140-2.090. Original rule filed Aug. 15,1983, effective Nov. 11, 1983. Moved to 20CSR 1140-2.090, effective Aug. 28, 2006.

*Original authority: 361.105, RSMo 1967 and 362.116,RSMo 1983, amended 1984.


Secretary of State


20 CSR 1140-2.095 Standards for CertainFiduciary Investments

PURPOSE: House Bill 105/480 of the 87thGeneral Assembly amended section362.550.5., RSMo to allow a bank or trustcompany to purchase, in a fiduciary capacity,state or political subdivision securities under-written by it, its parent or affiliated compa-nies, but subject to investment standards setby the director of the Division of Finance. Thepurpose of this rule is to set those standards.

(1) The standards of prudence and care estab-lished by subsection 456.520.1., RSMo,must be followed by a bank or trust companywhen purchasing, in a fiduciary capacity,state or political subdivision securities (secu-rities) underwritten by it, its parent or affili-ated companies.

(2) This prudence and care will require suchdeterminations as are appropriate for the typeof transaction involved including a considera-tion of the resource and liabilities of theobligor and a determination that the obligorpossesses the capacity to make all requiredpayments.

(3) The securities must be general obligationsor revenue bonds of the issuing entity.

(4) These securities, at the time of purchase,must be rated in the two (2) highest grades bya nationally recognized bond rating service.

AUTHORITY: sections 361.105, RSMo 1986and 362.550, RSMo Supp. 1991.* This ruleoriginally filed as 4 CSR 140-2.095. Emer-gency rule filed Aug. 6, 1993, effective Aug.28, 1993, expired Dec. 25, 1993. Originalrule filed Aug. 23, 1993, effective Jan. 31,1994. Moved to 20 CSR 1140-2.095, effec-tive Aug. 28, 2006.

*Original authority: 361.105, RSMo 1967 and 362.550,RSMo 1967, amended 1972, 1983, 1991.

204 CSR 1140-2.100 Reports of Condition(Call Reports)

PURPOSE: Sections 361.130 and 362.295,RSMo together require regular periodicReports of Condition (Call Reports) be madeto the commissioner of finance, that thesereports be published by the reporting institu-tion and that this publication be certified tothe commissioner. This rule eliminates unnec-essary duplications of effort by declaring theReports of Conditions required by the Feder-al Deposit Insurance Corporation or the Fed-

eral Reserve System acceptable for statereporting purposes.

(1) A state bank may satisfy the Report ofCondition (Call Report) filing requirement byfiling with the commissioner of finance anoriginally signed copy of the Report of Con-dition filed with the Federal Deposit Insur-ance Corporation (FDIC) or the FederalReserve System provided that report corre-sponds with the date of the commissioner’srequest.

(2) Requirements that the report be publishedand that the publication be certified to thecommissioner according to section 362.295,RSMo remain unchanged.

AUTHORITY: sections 361.105 and 362.295,RSMo 1986 and 361.130, RSMo Supp.1988.* This rule originally filed as 4 CSR140-2.100. Original rule filed Oct. 8, 1982,effective Jan. 15, 1983. Moved to 20 CSR1140-2.100, effective Aug. 28, 2006.

*Original authority: 361.105, RSMo 1967; 361.130,RSMo 1939, amended 1949, 1988; and 362.295, RSMo1939, amended 1967.

20 CSR 1140-2.110 Management andOther Fees Paid by State-Chartered Banks

PURPOSE: This rule formalizes the policy ofthe Division of Finance toward bonuses, man-agement fees, consultant’s fees and other feespaid by state-chartered banks to officers,directors, shareholders or their related inter-ests which do not provide commensurate ser-vices. This rule is not intended to establishsalary policy for active salaried officers.

(1) Payments of bonuses, other than to full-time salaried employees, management fees,consultant’s fees and other fees which bearlittle or no relationship to the type, level,quality or value of services received, whenpaid to officers, directors, shareholders ortheir related interest are unsafe and unsoundas they can result in dissipation of earningsand capital, have adverse effects on the finan-cial interests of minority shareholders and, insome cases, may result in a finding by theInternal Revenue Service or preferential div-idends with the bank being held liable foradditional income taxes.

(2) The cash-flow requirements of the stockholder, whether to service the acquisitiondebt or otherwise, may not be considered inestablishing management fees, consultant’sfees or other fees. These cash-flows, instead,should be generated from outside sources or

from a prudent dividend policy which mustbe consistent with the bank’s need for an ade-quate capital structure.

(3) Management fees, consultant’s fees andother fees paid by state-chartered banks mustbe based on and bear a direct relationship tothe fair market value of the services received.The bank may purchase and pay for only theservices that meet the legitimate needs of thebank. The provider must possess the neces-sary expertise to deliver the services. Theprovider may recover overhead costs to theextent that the costs represent a legitimateand integral part of the services provided.

(4) State-chartered banks which pay manage-ment and consultant fees to insiders or relat-ed interests will be required to maintain per-manent records in sufficient detail to indicateto the directors and bank examiners the spe-cific services which were performed and thebasis upon which the costs were assessed.State bank examiners will review all thesefees to identify instances where they areexcessive. In those cases where the fees arenot properly documented, where the amountscannot be justified, or both, it will be theresponsibility of the directors to obtain appro-priate documentation or to seek reimburse-ment.

(5) Banks in chain banking organizations orowned by multibank holding companies fre-quently pay management fees, consulting feesor other fees to insiders and their interests ona pro rata basis. However, the pro ratamethod is not an appropriate method of allo-cation in all cases. To assist in allocatingthese fees, this rule includes a list of some ofthe more common types of services whichmay be rendered. Opposite each of these ser-vices is a classification indicating how theexpense normally should be billed. Theseguidelines are not absolutes but deviationswill be reviewed on a case-by-case basis forcompliance with the intention of this rule.

Classification of Holding Company Expenses

Service Provided Expense ClassificationElectronic data processing Individual subsidiary billing

Corporate audit Individual subsidiary billing

Loan review Individual subsidiary billing

Mergers and establishment Individual subsidiary billingof branches (includingsite planning)

Tax preparation other than Individual subsidiary billingconsolidated returns

Corporate tax plan and Pro rata basisconsolidated returns


Secretary of State




Personnel operations— Individual subsidiary billingtraining, evaluation andcompensation

Holding company executive Pro rata basismanagement and staffsalaries and wages

Regulatory relations and Pro rata basisplanning

General legal services Pro rata basis

Specific legal service Individual subsidiary billing(lawsuits, courtproceedings,administrativehearings, briefs, opinions)

Marketing operations— Pro rata basisresearch

Marketing development Pro rata basisand advertisingprograms—general

Marketing development Individual subsidiary billingand advertisingprograms—specific (forexample, de novo bank)

Security measures and Individual subsidiary billingprocedures

Investment advice Individual subsidiary billing

Money desk operations Individual subsidiary billing

Holding company Pro rata basisoccupancy costs

AUTHORITY: section 361.105, RSMo 1986.*This rule originally filed as 4 CSR 140-2.110.Original rule filed Aug. 15, 1983, effectiveNov. 11, 1983. Moved to 20 CSR 1140-2.110,effective Aug. 28, 2006.


20 CSR 1140-2.120 Identification ofBranches

PURPOSE: In 1983, the general assemblyamended the Missouri bank facility law, sec-tion 362.107, RSMo, to permit two or morebanks located in the same county to mergeand retain all branching rights possessed bythe respective banks prior to the merger. Thenumerous mergers which have occurred sincethe change have heightened the questionswhich have been raised concerning the pub-lic’s perception of banking offices. Some con-cern has been expressed that depositors mayexceed the limit of Federal Deposit InsuranceCorporation insurance coverage by deposit-ing excess amounts in two offices of the samebank which they perceive to be differentbanks. These questions arise because of theunderstandable wish of banks to identify withthe community in which the branch is locatedby naming the branch after that community orretaining the name of the merged bank. This

rule sets standards for accurate marketingpolicies concerning branches of banks and itnot intended to curtail creative marketing bybanks.

(1) A bank shall avoid the use of any market-ing tools including, but not limited to, signs,print media or broadcast media which fostera belief that any branch is a separately char-tered or organized bank.

(2) All official bank documents, including,but not limited to, checks, cashier’s checks,loan applications and certificates of deposit,must bear the name of the bank, reference toany branch name on an official documentmay not be more prominent than the name ofthe bank.

AUTHORITY: section 361.105, RSMo 1986.*This rule originally filed as 4 CSR 140-2.120. Original rule filed June 12, 1984,effective Nov. 15, 1984. Amended: Filed Aug.7, 1992, effective Feb. 26, 1993. Moved to 20CSR 1140-2.120, effective Aug. 28, 2006.


20 CSR 1140-2.126 Branch Banking

PURPOSE: Under the McFadden Act, 12USC 36, national banks are authorized tobranch only to the extent state banks maybranch. Federal courts have recently ruledthat national banks are no longer bound byMissouri branch banking laws. This rulegrants equal branching rights to state banksand trust companies to ensure competitiveequality with national banks.

Editor's Note: The secretary of state hasdetermined that the publication of this rule inits entirety would be unduly cumbersome orexpensive. The entire text of the material ref-erenced has been filed with the secretary ofstate. This material may be found at theOffice of the Secretary of State or at the headquarters of the agency and is available to anyinterested person at a cost established bystate law

(1) Banks and trust companies, with theapproval of the commissioner of finance, mayestablish, maintain and operate brancheswithout restriction as to location or number.

(2) A bank or trust company seeking to estab-lish a branch shall make application to thecommissioner on forms as the commissionermay provide. The commissioner shall consid-er—

(A) The convenience, needs and welfare ofthe people of the community and area served;

(B) The financial strength of the bankinginstitution making application for the branchin relation to the cost of establishing andmaintaining the branch; and

(C) Whether other banking institutions willbe seriously injured by the approval of theapplication for a branch at the location spec-ified.

AUTHORITY: section 362.105, RSMo Supp.1992.* This rule originally filed as 4 CSR140-2.126. Emergency rule filed Nov. 19,1990, effective Nov. 29, 1990, expired March28, 1991. Emergency rule filed March 19,1991, effective March 29, 1991, expired May1, 1991. Original rule filed Nov. 19, 1990,effective April 29, 1991. Moved to 20 CSR1140-2.126, effective Aug. 28, 2006.

*Original authority: 362.105, RSMo 1939, amended1949, 1963, 1965, 1967, 1977, 1983, 1986, 1990, 1991,1992.


Secretary of State


20 CSR 1140-2.127 Branch Banking—ATMs

PURPOSE: On September 30, 1996, federallaw (12 U.S.C. 36) was amended to state thatautomated teller machines and remote ser-vice units were not branches, eliminating theneed for regulatory approval. This rulerestores parity between state and nationalbanks.

The term “branch” in section 362.107,RSMo does not include an automated tellermachine, a point of sale device, a cash dis-pensing machine, or similar unmanned bank-ing terminal. Accordingly, it is not necessaryto obtain the approval of the commissioner offinance to establish or relocate such a device.

AUTHORITY: sections 361.105 and362.105.4, RSMo Supp. 1996 and 362.107,RSMo 1994.* This rule originally filed as 4CSR 140-2.127. Emergency rule filed Dec.10, 1996, effective Dec. 20, 1996, expiredJune 17, 1997. Original rule filed Dec. 10,1996, effective May 30, 1997. Moved to 20CSR 1140-2.127, effective Aug. 28, 2006.

*Original authority: 361.105, RSMo 1967, amended1993, 1994, 1995; 362.105, RSMo 1939, amended 1949,1963, 1965, 1967, 1977, 1983, 1986, 1990, 1991, 1992,1995; and 362.107, RSMo 1959, amended 1971, 1972,1978, 1980, 1982, 1983, 1985, 1986, 1987, 1990, 1991.

20 CSR 1140-2.130 Securities Activities

PURPOSE: This rule establishes the limitswithin which banks may offer securities ser-vices for their customers with particularemphasis on the rules which must be followedin the interest of safety and soundness. Cer-tain of these powers are granted to assurethat state-chartered banks will remain com-petitive with national banks. Other powersare derived from express powers contained inthe statutes.

(1) Definitions.(A) Bank means a state-chartered bank and

trust company.(B) Commissioner means the commission-

er of finance of Missouri, who is the directorof the Division of Finance under section361.010, RSMo.

(C) Discount brokerage service meansthose activities through which a bank facili-tates the execution of securities transactionsfor its customers by arranging for the trans-mission of customer orders to a broker.

(D) Issuer means every person who issuesor proposes to issue any security except that,with respect to an issue of industrial revenuebonds, the term shall include the person forwhose benefit the bonds were issued.

(E) Securities services means the purchaseand sale of investment securities withoutrecourse solely upon order and for theaccount of customers, the underwriting ofmutual funds, revenue bonds and other debtsecurities issued by any public or private cor-poration, association or partnership, offeringinvestment advice to customers other thanthrough a properly organized trust depart-ment and discount brokerage services.

(F) Securities subsidiary means a wholly-owned corporate subsidiary of a bank orga-nized to engage in securities activities pur-suant to this rule.

(G) Underwriting means the direct or indi-rect purchase of part or all of an issue ofsecurities with a view to subsequent resale ofthose securities.

(2) A bank may offer securities services inaccordance with the provisions of this ruleonly if—

(A) These securities services are offered byand through a securities subsidiary of thebank;

(B) The bank meets Division of Financeguidelines for capital adequacy; and

(C) The bank and any securities subsidiarycomply with all applicable laws and regula-tions administered by the commissioner offinance, the Missouri commissioner of secu-rities, the Federal Securities Exchange Com-mission and the Federal Deposit InsuranceCorporation (FDIC).

(3) No bank may establish or own a securi-ties subsidiary unless—

(A) The bank has first obtained theapproval of the commissioner; and

(B) The securities subsidiary is—1. Operated as a separate corporate enti-

ty with its own meetings, records and books;2. Reasonably capitalized in view of the

needs of the corporation; and3. Operated through procedures and

forms which clearly disclose that it is sepa-rate from the bank and not insured by theFDIC.

(4) No subsidiary may underwrite securitiesif the total amount of securities underwrittenand held on behalf of an issuer, when aggre-gated with credit extended by the bank to orfor the benefit of the issuer, would exceed theamount which the bank could lend to theissue under section 362.170, RSMo.

(5) Each securities subsidiary shall adopt andsubmit to the commissioner its dealing andunderwriting standards setting forth the min-imum standards which securities under-writ-

ten, purchased and sold by the subsidiarymust meet.

(6) No bank which offers securities servicesthrough a securities subsidiary may extendcredit to any—

(A) Person for the purpose of enabling theperson to acquire any security which is eitherunderwritten, distributed or issued by thesubsidiary or issued by any investment com-pany advised by the subsidiary; and

(B) Issuer whose securities, at the time ofthe extension, are underwritten or distributedby the securities subsidiary unless the bank’sboard of directors gives its prior approval andstates, in writing, its determination that theextension is not made to facilitate the under-writing, distribution or sale of the securitiesor unless the extension is made pursuant to abinding commitment entered into prior to theunderwriting, distribution or sale.

(7) Notwithstanding the provisions of thisrule, any bank may directly purchase and sellinvestment securities without recourse, solelyon order and for the account of customers,offer discount brokerage services or under-write or deal in obligations of the UnitedStates or general obligations of any state or ofany political subdivision.

AUTHORITY: sections 361.105, RSMo 1986,362.105, RSMo Supp. 1992 and 362.170,RSMo Supp. 1989.* This rule originallyfiled as 4 CSR 140-2.130. Original rule filedAug. 18, 1987, effective Nov. 12, 1987.Moved to 20 CSR 1140-2.130, effective Aug.28, 2006.

*Original authority: 361.105, RSMo 1967; 362.105RSMo, 1939, amended 1949, 1963, 1965, 1967, 1977,1983, 1986, 1990, 1991, 1992; and 362.170, RSMo 1939,amended 1941, 1943, 1945, 1959, 1963, 1967, 1977,1983, 1985, 1986, 1989.

20 CSR 1140-2.138 Financial Subsidiaries

PURPOSE: This section sets forth authorizedactivities, approval procedures, and condi-tions for banks and trust companies engagingin activities through a financial subsidiaryunder section 362.105.1(15), RSMo 2000. Inthe interests of being brief and concise, theregulation does not include certain restric-tions applicable only to extremely large insti-tutions. The Division of Finance will amendthe regulation to include these restrictions ifappropriate in the future.

(1) Financial Subsidiary Powers. A bank ortrust company may establish a “financial sub-sidiary.” A financial subsidiary is any sub-sidiary of the bank or trust company other



than a subsidiary that conducts only a) activ-ities in which its parent bank or trust compa-ny may engage directly, and/or b) activitiesthat are authorized for subsidiaries of thatbank or trust company under Missouristatutes or regulations other than this regula-tion or section 362.105.1(15), RSMo 2000.A financial subsidiary may engage in any ofthe activities authorized for a national bankfinancial subsidiary under the Gramm-Leach-Bliley Financial Modernization Act of 1999and the implementing regulations and officialfederal agency interpretations.

(2) Requirements. To establish or continue tohold an interest in a financial subsidiary, abank or trust company must:

(A) Meet the Missouri minimum capitalrequirement as defined in section (5) of thisregulation;

(B) Be, along with each of its depositoryinstitution affiliates, well capitalized and wellmanaged pursuant to the definitions includedin section (5) of this regulation;

(C) In addition to providing informationprepared in accordance with generallyaccepted accounting principles, separatelypresent financial information for the institu-tion in the manner provided in paragraph(5)(C)2. of this rule in any published or post-ed financial statement of the institution;

(D) Have aggregate consolidated totalassets of all financial subsidiaries not exceed-ing forty-five percent (45%) of the bank ortrust company’s consolidated total assets;

(E) Have reasonable policies and proce-dures to preserve the separate corporate iden-tity and limited liability of the institution andthe financial subsidiaries of the institution;

(F) Have procedures for identifying andmanaging financial and operational riskswithin the institution and the financial sub-sidiary that adequately protect the institutionfrom such risks;

(G) Have obtained Community Reinvest-ment Act (CRA) ratings of “satisfactoryrecord of meeting community credit needs”or better on the most recent CRA examina-tion of the bank or trust company and any ofits insured depository institution affiliates;and

(H) Comply with the requirements of sec-tions 23A and 23B of the Federal Reserve Actapplicable to financial subsidiaries.

(3) Notice and Approval Process. A bank ortrust company establishing a financial sub-sidiary to conduct only agency activities mustprovide the Division of Finance with a writ-ten notice within thirty (30) days after suchestablishment. However, a bank or trust com-pany must obtain prior written approval from

the Division of Finance before any of itsfinancial subsidiaries can conduct any activi-ties as principal.

(4) Remedies for Failure to Meet Require-ments.

(A) If a bank or trust company does notcontinue to satisfy the requirements of sub-sections (2)(A) through (2)(F) of this regula-tion for establishing or holding an interest ina financial subsidiary, the bank or trust com-pany must, within forty-five (45) days afterreceiving written notice from the Division ofFinance of such noncompliance, either enterinto an agreement with the Division ofFinance to comply with such sections or besubject to enforcement action to require suchcompliance, which may include, but will notbe limited to, restrictions on the activities ofthe institution or any of its subsidiaries or, ifthe noncompliance continues for one hundredeighty (180) days or more after the writtennotice, divestiture of ownership in the finan-cial subsidiary.

(B) The remedies specifically mentioned insubsection (4)(A) do not limit any ability ofthe Division of Finance to take any enforce-ment action based on any violation of statuteor regulation or on any safety and soundnessissue, including, but not limited to violationsof other sections of this regulation.

(5) Definitions.(A) “Establish a financial subsidiary”

means to acquire control of a financial sub-sidiary or to control any subsidiary that com-mences financial subsidiary activities.

(B) “Missouri minimum capital require-ment” means a level of capital which equalsor exceeds the required minimum level spec-ified by the Division of Finance.

(C) Well capitalized.1. “Well capitalized” means an institu-

tion has a level of capital designated as “wellcapitalized” pursuant to 12 U.S.C. 1831 bythe institution’s appropriate federal bankingagency, as defined in 12 U.S.C. 1813.

2. Provided, however, that for a bank ortrust company that controls a financial sub-sidiary to be “well capitalized,” it must alsoremain well capitalized as described in para-graph (5)(C)1. after deducting the aggregateamount of its outstanding equity investment,including retained earnings, in its financialsubsidiaries from its total assets and tangibleequity and also deducting such investmentfrom its total risk-based capital, and the bankor trust company will not consolidate theassets and liabilities of the financial sub-sidiary with those of the bank or trust com-pany for purposes of determining regulatorycapital under this subsection.

(D) “Well managed” means:1. An institution has received a compos-

ite rating of 1 or 2 under the Uniform Finan-cial Institutions Rating System (or an equiva-lent rating under an equivalent rating system)in connection with the most recent Divisionof Finance or federal regulatory agencyexamination or subsequent review of the insti-tution and, at least a rating of 2 for manage-ment; or

2. In the case of an institution that hasnot been examined by the Division of Financeor a federal bank regulatory agency, the exis-tence and use of managerial resources that theDivision of Finance determines are satisfac-tory.

AUTHORITY: sections 361.105, 362.105 and362.106, RSMo 2000.* This rule originallyfiled as 4 CSR 140-2.138. Original rule filedDec. 29, 2000, effective Aug. 30, 2001.Moved to 20 CSR 1140-2.138, effective Aug.28, 2006.

*Original authority: 361.105, RSMo 1967, amended1993, 1994, 1995; 362.105, RSMo 1939, amended 1949,1963, 1965, 1967, 1977, 1983, 1986, 1990, 1991, 1992,1995, 2000; 362.106, RSMo 1981, amended 1985, 1990.

20 CSR 1140-2.140 Preservation of Booksand Records

PURPOSE: Senate Bill 773, passed by the84th General Assembly, enacted a new sec-tion 362.410, RSMo which requires the com-missioner of finance to prescribe by rule min-imum times for preservation of books andrecords. This rule states those times.

(1) The following Appendix A, includedherein, lists the minimum times for preserva-tion of books and records by state-charteredbanks and trust companies. Where other lawrequires a longer retention, the greater periodshould be observed. Preservation on icroilm,microfiche or by means of electronic storageis acceptable.

APPENDIX A

Key to Abbreviations

p.s. or Opt. —Purpose Served or Optional D —Destroy

Months—Figure with mos.Years—Figures

Permanently—PI. ADMINISTRATIVE

Minute Books

Minute books of directors, oaths of direc-tor’s nonresident directors’ consent to


Secretary of State


service, executive committees, stock-holders’ and other meetings P

Auditing and Accounting

Accrual records 5Audit work papers 2Auditing copy of debits and

credits to loans and discounts 3Bank examiner’s reports PBudget work sheets 1Daily reserve computation 1Difference records 2Monthly reports to directors 5Reconcilements of bank deposits (due to) 3Reports of condition and income PReconcilements register (due from) 5Reports to executive committees 7Securities vault, in and out tickets 3Tax records 8

Record of Employees

Applications, reference records,reports and results of examinations,service record, efficiency tests,after leaving service 6

II. CASH

Due From Banks

Advices from correspondents 2Affidavits/bonds of indemnity for

duplicate drafts issued PBank statements 2Departmental or tellers’ proof sheets 2Drafts 7Draft register 7Reconcilements 2

Proof of Clearings

Clearinghouse settlement checks 7Clearinghouse settlement sheets 2Deposit proof/sheets or tapes 2In-clearing proof/sheets 2In-clearing tapes 2Out-clearing proof/sheets 2On U.S. checks 7

Tellers

Cash item record 5Cash item register 5Receipts for return items 2Return item carbons 2Tellers’ cash books 2Tellers’ cash tickets, original and carbon 2Tellers’ recapitulation (with general

ledger tickets) 7Tellers’ scratcher or blotter 2

Transit

Outgoing cash letters 2Photographic or electronic storage media 5Proof/sheets 2

III. DEPOSITS

Account Analysis

Analysis work sheets or cards 2Average balance cards 2Interest computation records 3Service charge records 10Trial balances 2

Bank (due to) Deposits

Advice of debit and credit andmemo entries 2

Cash letters 2Cash letters for remittance 2Copies of advices of deposit 3 mos.

Capital

Capital stock certificates, records or stubs PCapital stock ledger PCapital stock transfer register PDividend checks 7Dividend register 7Profit and loss records 7Proxies 7Register of and cancelled certificates 7

General Ledger

Daily statement of condition 7General journal 2General ledger 10General ledger tickets 7

Insurance Records

Bankers blanket bond (after expiration) 10Expired policies (except liability) 10Expired policies (liability) PRecords of policies in force PSchedule of fire and other policies

and record of payment of premiumsand sums recovered 6

Investments—Bank’s Portfolio

Bond ledger PBrokers’ confirmations 7Ledger journal 2Reconcilements 2Reports of accounts, opened and closed 2Resolutions (after account closed) 7Signature cards (after account closed) 7Trial balances 2

Certificates of Deposit

Certificates (paid) 7Ledger cards (paid) 7Register (paid) 7

Commercial andIndividual Deposits

Bookkeepers’ daily list of checkscharged in total 7

Checkbook orders Opt.Copies of advices of deposit 2Daily report of overdrafts 3Deposit tickets 7Duplicate deposit tickets Opt.Individual ledger journal 2Individual ledgers 7Reports of accounts opened and closed 2Resolutions (after account closed) 7Signature cards (after account closed) 7Signature power of attorney

(after account closed) 7Statement mailing order

(after account closed) Opt.Statement receipt cards

(after account closed) Opt.Statement stubs 2Stop payment orders (after release) 2Trial balances 2Unclaimed deposits PUndelivered statements and

cancelled checks 7

Official Checks and Drafts

Cashiers’ check register 7Cashiers’ checks 7Certified checks 7Certified check register 7Draft stubs Opt.Draft register 7Drafts 7Expense check register 7Expense checks 7Expense vouchers 5Letters of credit and documents 5Receipts for certified checks 7Requisitions Opt.Unclaimed checks and drafts P

Savings Deposits

Deposit tickets 7Duplicate deposit tickets Opt.Journal 7Ledger cards or sheets 7NCR control journal tapes 7Passbooks (closed accounts) Opt.Reports of accounts opened and closed 2Resolutions (after account closed) 7Signature cards (after account closed) 7Signature powers of attorney 7




Secretary of State


Trial balances 2Trial balances showing semiannual

interest 3Unclaimed deposits PWithdrawal receipts 7

IV. MISCELLANEOUS

Collections

Collection receipts, carbons of Opt.Collection register 3Coupon cash letters, outgoing 3Coupon envelopes Opt.Customers’ file copies 3Incoming collection letters 3Installment contract or note

records (after closing) 7

Customer Service

Brokers’ confirmations 2Brokers’ invoices 2Brokers’ statements 2Escrow records (after closing) 7Safekeeping records and receipts PSecurities buy and sell orders 6

General

Affidavits PApplications for travelers’ checks Opt.Attachment releases 7Attachments, garnishments 7Brokers’ invoices 7Brokers’ statements 7Buy and sell orders 7Change of address orders 2Code books (not returned) DCourt order (after case closed) 7Court order memorandum record 7Death claim files 3Descriptive literature on securities

disposed of 2Foreign exchange remittance sheets

or books (after issue) 7General correspondence 5Incoming mail envelopes Opt.Night depository records 7Paid bills, statements and invoices 7Protest notices Opt.Receipts for checkbooks Opt.Receipts (ordinary) 7Stenographers’ notebooks and

mechanical device records andextra copies of letters Opt.

Telegrams, cable and radiogram copies 7Telegraphic transfer receipts and records 7Trust records of final entry 22Unclaimed property PVault records, opening and closing 6 mos.

Loans and Discounts

Audit copy of debits and credits toloans and discounts 3

Collateral register and receipts 7Collateral substitution slips (receipts) 7Credit files (closed) 2Daily reports 2Debit and credit tickets 7Journal 7Liability ledger 7Loan applications 3Loan committee minutes 7Margin cards 2Note or discount register 7Note or discount tickler 3Payment receipts 3Resolutions (after loan is paid) 7

Personnel

Attendance record (after leaving service)including hours worked 3

Salary ledger 3Salary receipts 3

Registered Mail

Insurance declarations Opt.Registered mail (incoming) record 7Registered mail (outgoing) record 7Return receipt cards 7

Safe Deposit Vault

Access tickets (after entry date) 7Ledger record of account Opt.Leases or contracts (closed) 7Rent receipts Opt.Storage receipts 7

V. U.S. SAVING BONDS

U.S. Savings Bonds stubs, Series EE 2U.S. Savings Bonds Series EE applications 7(Note: Applications must show bond num-bers. File alphabetically by years.)

AUTHORITY: sections 361.105 and 362.410,RSMo 2000.* This rule originally filed as 4CSR 140-2.140. Original rule filed Aug. 3,1988, effective Nov. 11, 1988. Amended:Filed Jan. 16, 2003, effective Aug. 30, 2003.Moved to 20 CSR 1140-2.140, effective Aug.28, 2006.

*Original authority: 361.105, RSMo 1967, amended1993, 1994, 1995 and 362.410, RSMo 1939, amended1967, 1988.

20 CSR 1140-2.150 Lease Financing Limit-ed Partnerships

PURPOSE: The National Banking Act, 12USCA 24(10), by the Competitive EqualityBanking Act of 1987, P.L. 100-86, authorizesnational banks to invest in tangible personalproperty for lease financing transactions on anet lease basis. The Office of the Comptrollerof the Currency has decided to allow nation-al banks to exercise these powers by acquir-ing limited partnership interest in limitedpartnerships which restrict their business toengaging in such transactions. This regula-tion provides competitive equality betweennational and state banks by granting the samepower to state banks.

(1) Definitions.(A) Affiliation shall mean that a general

partner either controls, is controlled by or isunder common control with the bank and, forpurposes of this definition, control shallmean ownership of more than twenty-fivepercent (25%) of the total voting equity inter-est of the general partner or the bank.

(B) Bank means a state-chartered bank ortrust company.

(C) Equipment shall mean tangible person-al property.

(D) Limited partnership shall mean anorganization which has met all requirementsfor formation of a limited partnership underMissouri law.

(2) Every bank, directly or through a sub-sidiary, may invest in tangible personal prop-erty. This includes, without limitation, vehi-cles, manufactured homes, machinery,equipment or furniture for lease financingtransactions on a net lease basis, subject tothe same terms and conditions as a nationalbanking association pursuant to 12 U.S.C. 14(Tenth).

(3) A bank, in accordance with the provisionsof this rule, may exercise its rights to investin lease financing transactions on a net leasebasis by acquiring a limited partnership inter-est in one (1) or more limited partnershipswhich engage in these transactions.

(4) A lease financing limited partnership,also referred to in this rule as partnership,shall conform to the following conditions:

(A) The activities of the partnership shallbe strictly limited to investing in equipmentfor lease financing transactions;

(B) The leases shall be net leases as pro-vided in 12 CFR 7.3400 and, accordingly,the partnership shall not provide mainte-nance, repair or servicing of the equipment tobe leased. In addition, the partnership will



not engage in daily or short-term equipmentleasing or the automobile rental business;

(C) The general partner of each limitedpartnership shall be a reputable businessenterprise experienced in equipment leasingand shall have no prior affiliation with thebank;

(D) Each limited partner in the partnershipshall be a bank, a national banking associa-tion, an operating subsidiary of a nationalbanking association, a bank service corpora-tion or a registered bank holding company;

(E) Except for each bank’s obligation tomake a fixed capital contribution in consider-ation for its limited partnership interest in anamount set forth in a subscription agreement,each limited partnership agreement shall pro-vide that a bank admitted as a limited partnerto each limited partnership shall have no per-sonal liability or obligation for the liabilitiesand obligations of either the limited partner-ship or the general partner. Furthermore,each bank admitted as a limited partner to thepartnership shall have no obligation to makeany advances, loans or additional capital con-tributions to the partnership; and

(F) The partnership may not invest, withrespect to any lease customer, an amount inthe aggregate which would exceed the amountwhich the bank could invest in a lease to thatcustomer under section 362.170, RSMo.

(5) A bank’s total of investments and exten-sions of credit in all limited partnershipsengaged in the business of owning tangiblepersonal property for lease financing transac-tions on a net lease basis shall not exceed fivepercent (5%) of the bank’s assets. The bank’stotal equity investment in any one (1) suchlimited partnership shall not exceed twentypercent (20%) of the bank’s unimpaired cap-ital.

(6) The partnership agreement shall providethat the books and records of the partnershipshall be available for examination by the com-missioner of finance or any examiner desig-nated by him/her at anytime and place s/heshall designate and to the same extent as ifthe partnership were a bank. In addition, thepartnership agreement shall provide that eachbank shall have the contractual ability towithdraw as a limited partner if the commis-sioner determines a withdrawal is necessaryunder the principles of safe and sound bank-ing, or the laws and rules governing banks.

AUTHORITY: sections 361.105, RSMo, 1986and 362.105, RSMo Supp. 1992.* This ruleoriginally filed as 4 CSR 140-2.150. Origi-nal rule filed Sept. 15, 1988, effective Dec.11, 1988. Amended: Filed Nov. 14, 1989,

effective Feb. 11, 1990. Moved to 20 CSR1140-2.150, effective Aug. 28, 2006.

*Original authority: 361.105, RSMo 1967 and 362.105,RSMo 1939, amended 1949, 1963, 1965, 1967, 1977,1983, 1986, 1990, 1991, 1992.

rules of department of insurance, financial institutions ... csr 1140-2.020 legal reserves ......

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