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IBAA SUPPORTS CREDIT-CREATING EXEMPTIONS TO INSIDER-LENDING LIMITS

 WASHINGTON, Jan. 19 /PRNewswire/ -- The Independent Bankers Association of America (IBAA) today urged the Federal Reserve Board to amend Regulation O by adding further exemptions to insider-lending limits, thereby allowing more credit to flow in rural and small communities.
 In a comment letter, IBAA President Bob Hawkins praised the Board's proposal to grant exemptions, based on three categories of credit, to the aggregate insider-lending limits. However, he urged the Board to adopt exceptions for other categories of credit that pose minimal risk to the lending bank.
 The proposed exemptions provide some of the job-creating relief that the IBAA and other banking trade associations suggested to President-elect Clinton in a letter sent in early December. Regarding insider lending, the trade groups said that "because many business leaders in communities serve on the boards of banks from whom they obtain their primary business credit, these statutory changes force banks to choose between lending to local businesses and retaining these qualified business leaders as bank officers and directors." The result is that banks must choose between informed leadership and making job-creating loans.
 Hawkins said Regulation O -- which governs lending to bank officers, directors and shareholders -- hinders banks' ability to serve their communities, and to attract and retain qualified officers and directors.
 "As a consequence of the rule, directors have been driven off community bank boards, and banks have been prevented from lending to some of their best customers," said Hawkins, chairman of Southern Commercial Bank in St. Louis.
 He said the following categories of credit should also be granted exemptions from aggregate insider-lending limits:
 -- Credit secured by cash surrender value of a life insurance policy issued by an insurer meeting certain minimum rating standards;
 -- Credit secured by readily marketable listed securities such as stocks and bonds with loan-to-value ratios of at least 80 percent;
 -- Credit of the type that can be extended to executive officers;
 -- Loans that are to be sold promptly after origination, without recourse, to a financially responsible third party;
 -- Loans secured by bills of lading or warehouse receipts covering readily marketable staples, as allowed by national bank rules;
 -- Loans secured by livestock or dairy cattle, as allowed by national bank rules.
 In addition, Hawkins urged the Board to apply the same exemptions to aggregate insider-lending limits to individual insider-lending limits. If a loan category poses minimal risk for aggregate purposes, he said, it also poses minimal risk for individual purposes.
 "These actions will help ameliorate the adverse effects of Regulation O and will help stimulate lending in local communities," Hawkins said.
 IBAA is the only national trade association which exclusively represents the interests of the nation's community banks.
 -0- 1/19/93
 /CONTACT: Karen Thomas or Diane Casey of the Independent Bankers Association of America, 202-659-8111/


CO: Independent Bankers Association of America ST: District of Columbia IN: FIN SU:

TW -- DC022 -- 6485 01/19/93 15:28 EST
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Date:Jan 19, 1993
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