Activities Permissible for a National Bank, Cumulative

Activities Permissible for a National Bank, Cumulative INVESTMENTS 1  Acquisition of Preferred Securities. A national bank may purchase and hold the preferred securities of two special-purpose entities that hold interests in Australian mortgage assets. OCC Interpretive Letter No. 1027 (May 3, 2005). Acquisition of Preferred Stock of an Unaffiliated Company. A national bank has authority to acquire and hold the preferred stock of an unaffiliated company, pursuant to its authority to discount and negotiate evidences of debt, where the preferred stock is in substance a debt obligation of the issuer. The bank acquired the preferred stock as partial consideration for the disposition of a loan portfolio to the company. The bank’s existing holdings represent less than 5 percent

of the bank’s capital and surplus and are within applicable prudential standards and regulatory limits. OCC Interpretive Letter No. 941 (June 11, 2002). Agricultural Cooperative. Under Part 24, a national bank may purchase common stock in an agricultural cooperative, where the bank’s liability was limited to the amount of its equity investment. The cooperative was initiated by a local economic development authority and local farmers and businesses as a way to promote the economic development of the area, and had received financial support from both the economic development authority and the federal government. The cooperative also benefited low- and moderate-income individuals by creating permanent jobs for those individuals. Approval Letter (September 4, 2001), National Bank Community Development Investments 2001 Directory.  Agricultural Credit Corporations. National banks may purchase stock of a corporation organized to make loans to farmers and ranchers for agricultural purposes. An investment in such an agricultural credit corporation may not exceed 20 percent of a national bank’s capital and surplus, unless the national bank owns at least 80 percent. 12 USC 24(Seventh).  Asset-Backed Securities. National banks may invest up to 25 percent of capital and surplus in marketable investment grade securities that are fully secured by interests in a pool of loans to numerous obligors and in which a national bank may invest directly. 12 CFR 1.2(m), 1.3(f).  Banker’s Acceptances. National banks may invest in banker’s acceptances created by other nonaffiliated banks without limit, if they are created in accordance with 12 USC 372, and are thus “eligible” for discount with a Federal Reserve bank. But section 372(b), (c), and (d) restrict investment in the aggregate amount of banker’s acceptances created 1 For investments in partnerships, note that subsidiaries of national banks may become general partners, but national banks may not. 78 Office of the Comptroller of the Currency • April 2010 Activities Permissible for a National Bank, Cumulative by any one bank. Holdings of “ineligible” banker’s acceptances must be included in the purchasing bank’s lending limit to the accepting bank. 12 USC 84; 12 CFR. 32.  Banker’s Banks. National banks may invest in banker’s banks, or their holding companies, in an amount up to 10 percent of the national bank’s capital stock and unimpaired surplus. In addition, national banks may not hold more than 5 percent of the voting securities of a banker’s bank or holding company. 12 USC 24(Seventh). A banker’s...

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