TITLE 26

BANKS AND BANKING

CHAPTER 27

BUSINESS AND INDUSTRIAL DEVELOPMENT CORPORATIONS

26-2719.  Sound business practices required. (1) A licensee shall transact its business in a safe and sound manner and shall maintain itself in a safe and sound condition.

(2)  In determining whether a licensee is transacting business in a safe and sound manner or has committed an unsafe or unsound act, the director shall not consider the risk of a provision of financing assistance to a business firm, unless the director determines that the risk is so great compared with the realistically expected return as to demonstrate gross mismanagement.

(3)  The provisions of subsection (2) of this section do not limit the authority of the director to do any of the following:

(a)  Determine that a licensee’s financing assistance to a single business firm or a group of affiliated business firms is in violation of subsection (1) of this section or constitutes an unsafe or unsound act, if the amount of that financing assistance is unduly large in relation to the total assets or the total shareholders equity of the licensee.

(b)  Require that a licensee maintain a reserve in the amount of anticipated losses.

(c)  Require that a licensee have in effect a written financing assistance policy, approved by its board of directors, including credit evaluation and other matters. The director shall not require that a licensee adopt a financing assistance policy that contains standards which prevent the licensee from exercising needed flexibility in evaluating and structuring financing assistance to business firms on a deal by deal basis.

History:

[26-2719, added 1989, ch. 252, sec. 1, p. 614.]