New Jersey Administrative Code
Title 3 - BANKING
Chapter 11 - INVESTMENTS
Subchapter 7 - LIMITATION OF LIABILITY TO A BANK, SAVINGS BANK OR STATE ASSOCIATION
Section 3:11-7.8 - General lending limitations

(a) The total liabilities, including investment securities, of any person which are not fully secured, as determined in a manner consistent with (b) below, by collateral having a market value at least equal to the amount of the liability shall not exceed 15 percent of the capital funds of a bank. The 10 percent limitations prescribed in N.J.S.A. 17:9A-62A and 17:9A-62F are increased pursuant to N.J.S.A. 17:9A-62H.

(b) The total liabilities of any person secured by readily marketable collateral having a market value, as determined by reliable and continuously available price quotations, at least equal to the amount of funds outstanding shall not exceed 10 percent of the capital funds of the bank. This limitation shall be separate from and in addition to the limitation contained in (a) above.

(c) A liability based on the limitation contained in (b) above shall be secured by readily marketable collateral having a current market value of at least 100 percent of the amount of the loan or extension of credit at all times. "Current market value" means the bid or closing price listed for an item in a regularly published listing or an electronic reporting service.

(d) For purposes of this section, "readily marketable collateral" means financial instruments and bullion which are salable under ordinary circumstances with reasonable promptness at a fair market value determined by quotations based on actual transactions on an auction or a similarly available daily bid and ask price market. "Financial instruments" include stocks, notes, bonds, and debentures traded on a national securities exchange, "OTC margin stocks" (as defined in Regulation U of the Federal Reserve Board), negotiable certificates of deposit, commercial paper, bankers' acceptances and shares in money market and mutual funds of the type which issues shares in which banks may perfect a security interest.

(e) Financial instruments may be denominated in foreign currencies which are freely convertible to United States dollars. If collateral is denominated and payable in a currency other than that of the loan or extension of credit which it secures, the collateral must be revalued at least monthly, using appropriate foreign exchange rates, in addition to being repriced at current market value.

(f) Each bank must institute adequate procedures to ensure that the collateral value fully secures the outstanding loan at all times. If collateral values fall below 100 percent of the outstanding loan, to the extent that the loan is no longer in conformance with this section and exceeds the general 15 percent limitation, the loan must be brought into conformance within five business days, except where judicial proceedings, regulatory actions or other extraordinary occurrences prevent the bank from taking action.

(g) The total liabilities of any person secured by a segregated deposit account in the lending bank shall not be subject to any limitation based on the capital funds of the bank.