286.3 -280 Maximum debt of persons to bank or trust company. (1) Except as provided in subsection (2) of this section: (a) Subject to paragraph (b) of this subsection, a bank or trust company shall not permit any person to become indebted to it or become obligated as guarantor or surety to it in an amount exceeding twen ty percent (20%) of the bank's or trust company's capital stock actually paid in and actual amount of surplus, unless the person pledges, for any amount that exceeds the twenty percent (20%) limit, good collateral security or a mortgage upon real or person al property, which at the time is of more than the cash value of the indebtedness or obligation required to be secured under this paragraph above all other encumbrances; (b) In no event shall the indebtedness or obligation of any person exceed thirty perce nt (30%) of a bank's or trust company's capital stock actually paid in and actual amount of surplus; and (c) When computing the total of a bank's or trust company's capital stock actually paid in and actual amount of surplus, any negative balance of a bank 's or trust company's undivided profits account shall be deducted. the total of a bank's or trust company's capital stock actually paid in and actual amount of surplus, any negative balance of a bank 's or trust company's undivided profits account shall be deducted. (2) A bank or trust company may, in lieu of complying with subsection (1) of this section, elect to comply with the legal lending limits applicable to national banks, as set forth in 12 U.S .C. sec. 84 and 12 C.F.R. pt. 32, as amended. (3) A bank or trust company shall not permit any of its directors or executive officers to become indebted to it or become obligated as guarantor or surety to it in an amount that exceeds the amount that any ot her person is authorized by this section to become indebted or obligated to the bank or trust company. (4) In computing the indebtedness of any person: (a) The liability of any partnership in which the person acts as a general partner, and any obligation e ntered into for the benefit of a person, partnership, or association, shall be included in the total liabilities of the person, partnership, or association; and (b) 1. Any credit exposure arising from a derivative transaction, repurchase agreement, reverse purchase agreement, securities lending otal liabilities of the person, partnership, or association; and (b) 1. Any credit exposure arising from a derivative transaction, repurchase agreement, reverse purchase agreement, securities lending transaction, or securities borrowing transaction shall be included. 2. For the purposes of this paragraph, 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, or any quantitative measure or the occurrence of any event relating to, one (1) or mor e commodities, securities, currencies, interest or other rates, indices, or other assets. (5) Except as otherwise provided in this section, the same security, both in kind and amount, shall be required from stockholders as from nonstockholders. (6) The dis count of bills of exchange drawn against actually existing value, and the purchase or discounting of commercial or business paper actually owned by the person negotiating the paper, shall not be considered as borrowed money within the meaning of this secti on in fixing the limit of indebtedness or obligation of any person selling or negotiating the paper n negotiating the paper, shall not be considered as borrowed money within the meaning of this secti on in fixing the limit of indebtedness or obligation of any person selling or negotiating the paper to a bank. (7) (a) Except as provided in paragraph (b) of this subsection, a bank shall not make any loan or discount on the security of, or be the purchase r or holder of, the shares of its own capital stock, or the shares of stock of a bank holding company that controls the bank, in an amount that exceeds the amounts permitted by 12 U.S.C. sec. 371c, as that section read on July 15, 1986. (b) A bank may take property of any kind to satisfy or protect a loan previously made in good faith and in the ordinary course of business. (c) Any stock purchased or acquired under paragraph (b) of this subsection that exceeds the amount permitted under paragraph (a) of thi s subsection shall, within six (6) months from the time of purchase or acquisition, be sold or disposed of at public or private sale. (d) This subsection shall not be construed to affect or modify KRS 386.025. Effective: July 15, 2024 History: Amended 2024 Ky. Acts ch. 152, sec. 26, effective July 15, 2024. -- Amended 2023 Ky. ale. (d) This subsection shall not be construed to affect or modify KRS 386.025. Effective: July 15, 2024 History: Amended 2024 Ky. Acts ch. 152, sec. 26, effective July 15, 2024. -- Amended 2023 Ky. Acts ch. 101, sec. 1, effective June 29, 2023. -- Amended 2012 Ky. Acts ch. 77, sec. 1, effective July 12, 2012. -- Amended 2010 Ky. Acts ch 28, sec. 15, effective July 15, 2010. -- Amended 2006 Ky. Acts ch. 183, sec. 9, effective July 12, 2006. -- Amended 1992 Ky. Acts ch. 77, sec. 3, effective July 14, 1992. -- Amended 1986 Ky. Acts ch. 444, sec. 9, effective July 15, 1986; and ch. 472, sec. 1, effective July 15, 1986. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. secs. 581, 583, 609, 610. Formerly codified as KRS 287.280. Legislative Research Commission Note (7/12/2006). This section was amended in 2006 Ky. Acts ch. 183. In that same session, 2006 Ky. Acts ch. 247, sec. 38 required that all sections of KRS Chapters 287, 288, 290, 291, 294, 366, 366A, and 368 be renumbered as sections of a single KRS chapter entitled the 'Kentucky Financial Services Code.' Therefore, the Statute Reviser, acting under KRS 7.136(1), has changed the number of , 366A, and 368 be renumbered as sections of a single KRS chapter entitled the 'Kentucky Financial Services Code.' Therefore, the Statute Reviser, acting under KRS 7.136(1), has changed the number of this section and codified it as a section of KRS Chapter 286. Legislative Research Commission Note . This section was amended by two 1986 Acts which do not appear to be in conflict and have been compiled toget her. However, in combining the amendments it was necessary to retain the words 'in an amount' in subsection (2) of this section which had been deleted by Acts 1986, ch. 472, § 1.
Kentucky Legal Code