1. (a) Notwithstanding Finance Code, §34.102(d), a state bank may make loans on the collateral security of securities issued by an affiliate, if the loan is subject to and in compliance with the provisions of the Federal Reserve Act, §23A and §23B (12 United States Code (USC), §371c and §371c-1). Pursuant to §23A of the Federal Reserve Act, the securities issued by an affiliate of a bank are not acceptable as collateral for a loan or extension of credit to, or guarantee, acceptance, or letter of credit issued on behalf of, that affiliate of the bank. These provisions are applicable to nonmember insured banks by virtue of the Federal Deposit Insurance Act, §18(j)(1) (12 USC, §1828(j)(1)).
2. (b) A loan must be subtracted from the capital of a lending bank if the loan proceeds are used directly, or indirectly, for the purpose of recapitalizing the lending bank, unless the loan is fully secured by irrevocable letters of credit or other liquid assets.

Source Note:The provisions of this §12.31 adopted to be effective May 17, 1996, 21 TexReg 3935.