Current through Vol. 42, No. 1, September 16, 2024
(a) Section 203(2) of the Code provides that
in addition to the other powers conferred by the Banking Code, the Board shall
have the power to define any term not defined therein.
(b) State-chartered banks and trust companies
are prohibited from engaging in unsafe or unsound practices. As used in the
Code, unsafe or unsound banking or trust practice shall be defined as any
action, or lack of action, that is contrary to generally accepted standards of
prudent operation of a bank or trust company which leads to an abnormal risk of
loss or damage to a bank or trust company, its shareholders or depositors, or
the insurance fund of the FDIC. The seriousness of each action or inaction, and
its likely results, must be considered; an imprudent action or inaction is not
automatically an unsafe or unsound banking practice.
(c) Whether a particular activity is an
unsafe or unsound banking practice must be determined in light of all relevant
facts. The Department furnishes the following list as a guideline only. The
activities described herein are not irrebuttably presumed to be unsafe or
unsound. Conversely, not all practices which might under the circumstances be
termed unsafe or unsound are mentioned here:
(1) Operating with management whose policies
and practices are detrimental to the bank or trust company and jeopardize the
safety of the bank's or trust company's deposit.
(2) Operating with total adjusted capital and
reserves that are inadequate in relation to the kind and quality of the assets
of the bank or trust company.
(3)
Operating in a way that produces a deficit in net operating income.
(4) Operating with a serious lack of
liquidity, especially in view of the asset and deposit structure of the bank or
trust company.
(5) Engaging in
speculative and hazardous investment policies.
(6) Paying excessive cash
dividends.
(7) Excessive reliance
on purchased deposits.
(8)
Excessive reliance on letters of credit either issued by the bank or accepted
as collateral to loans advanced.
(9) Excessive amounts of loan participations
sold.
(10) Paying interest on
participations without advising participating institution that the course of
interest was not from the borrower.
(11) Selling participations without
disclosing to the purchasers of those participations material, non-public
information known to the bank.
(12)
Failure to limit, control and document contingent liabilities.
(13) Engaging in hazardous lending and lax
collection policies and practices, as evidenced by:
(A) an excessive volume of loans subject to
adverse classification,
(B) an
excessive volume of loans without adequate documentation, including credit
information,
(C) excessive net loan
losses,
(D) an excessive volume of
loans in relation to the total assets and deposits of the bank or trust
company,
(E) an excessive volume of
weak and self-serving loans to persons connected with the bank or trust
company, especially if a significant portion of these loans are adversely
classified,
(F) excessive
concentrations of credit, especially if a substantial portion of this credit is
adversely classified,
(G)
indiscriminate participation in weak and undocumented loans originated by other
institutions,
(H) failing to adopt
written loan policies,
(I) an
excessive volume of overdue loans, and
(J) failure to diversify the loan portfolio
of the bank.
(14)
Permitting officers to engage in lending practices beyond the scope of their
position.
(15) Operating the bank
with inadequate internal controls.
(16) Operating the bank with excessive volume
of out-of-territory loans.
(17)
Failure to heed warnings and admonitions of the supervisory authorities of the
bank or trust company.
(18)
Continued and flagrant violation of any laws, rules, regulations or written
agreements between the bank or trust company and the Commissioner or the Board,
or order of the Commissioner or Board.
(19) Any action likely to cause insolvency or
substantial dissipation of assets or earnings of the bank or trust company or
likely to seriously weaken the condition of the bank or trust company or
otherwise seriously prejudice the interest of its depositors.
Amended at 15 Ok Reg
2952, eff 7-15-98; Amended at 25 Ok Reg 1064, eff
5-25-08
