Texas Register, Volume 38, Number 35, Pages 5587-5800, August 30, 2013 Page: 5,619
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The amendments are proposed under Finance Code,
34.201(b), which authorizes the commission to adopt rules
to administer the lending limit, including rules to (1) define or
further define terms used by 34.201, and (2) establish limits,
requirements, or exemptions other than those specified by
34.201 for particular classes or categories of loans or exten-
sions of credit. In addition, Finance Code, 31.003, authorizes
the commission to adopt rules to accomplish the purpose of
Subtitle A, relating to state banks. As required by Finance Code,
31.003(b), the commission considered the need to promote a
stable banking environment, provide the public with convenient,
safe, and competitive banking services, preserve and promote
the competitive position of state banks with regard to national
banks and other depository institutions in this state consistent
with the safety and soundness of state banks and the state bank
system, and allow for economic development in this state.
Finance Code, 34.201, is affected by the proposed amend-
ments.
12.2. Definitions.
Definitions in the Finance Code, Title 3, Subtitles A and G, are incor-
porated herein by reference. As used in this subchapter and in Finance
Code, Chapter 34, concerning investments and loans, the following
words and terms shall have the following meanings, unless the con-
text clearly indicates otherwise.
(1) - (5) (No change.)
(6) Effective margining arrangement--A master legal
agreement governing derivative transactions between a bank and a
counterparty that requires the counterparty to post, on a daily basis,
variation margin to fully collateralize that amount of the bank's net
credit exposure to the counterparty that exceeds $25 million [$- mil-
lien] created by the derivative transactions covered by the agreement.
(7) Eligible credit derivative--A single-name credit deriva-
tive or a standard, non-tranched index credit derivative provided that:
(A) - (B) (No change.)
(C) if the credit derivative is a credit default swap, the
derivative contract includes the following credit events:
(i) (No change.)
(ii) bankruptcy, insolvency, restructuring (for oblig-
ors not subject to bankruptcy or insolvency), or inability of the obligor
on the reference exposure to pay its debts, or its failure or admission
in writing of its inability generally to pay its debts as they become due,
and similar events;
(D) - (G) (No change.)
(8) (No change.)
(9) Federal capital adequacy guidelines--The federal refer-
ence entitled "Capital Adequacy Guidelines for Banks: Internal-Rat-
ings-Based and Advanced Measurement Approaches," codified as Ap-
pendix D [G] to 12 C.F.R. part 325 (or Appendix F to 12 C.F.R. part 208
in the case of a bank that is a member of the Federal Reserve System).
(10)- (16) (No change.)
12.3. Loans and Extensions of Credit.
(a) (No change.)
(b) Loans or extensions of credit for purposes of the Finance
Code, 34.201, and this subchapter do not include:
(1)- (5) (No change.)(6) intra-day credit exposures arising from a derivative
transaction or a securities financing transaction; [or]
(7) a renewal or restructuring of a nonconforming loan as a
new loan or extension of credit, subject to compliance with 12.10(b)
of this title (relating to Nonconforming Loans); and[.]
(8) that portion of one or more loans or extensions of credit,
not to exceed 15% of the bank's Tier 1 capital, with respect to which
the bank has purchased protection in the form of a single-name credit
derivative that meets the requirements of 12.2(a)(7) of this title (relat-
ing to Definitions) from an eligible protection provider if the reference
obligor is the same legal entity as the borrower in the loan or extension
of credit and the maturity of the protection purchased equals or exceeds
the maturity of the loan or extension of credit.
12.10. Nonconforming Loans.
(a) A loan or extension of credit, within a bank's legal lending
limit when made, will not be considered a violation of the applicable
lending limit but will be cited as nonconforming if the loan no longer
complies with the bank's legal lending limit because:
(1) - (4) (No change.)
(5) in the case of a credit exposure arising from a trans-
action identified in 12.12(a) of this title (relating to Credit Exposure
Arising from Derivative and Securities Financing Transactions) and
measured by the [internal] model method specified in 12.12(b)(1)(A)
or (c)(1)(A), the current exposure method specified in 12.12(b)(1)(C),
or the Basel collateral haircut method specified in 12.12(c)(1)(C) [of
this title], an increase in the credit exposure subject to the lending lim-
its of Finance Code, 34.201, or this subchapter after execution of the
transaction; or
(6) (No change.)
(b) - (c) (No change.)
12.12. Credit Exposure Arising from Derivative and Securities Fi-
nancing Transactions.
(a) (No change.)
(b) Derivative transactions.
(1) Non-credit derivatives. Subject to paragraphs (2) -(4)
[and (-3] of this subsection, a state bank shall calculate the credit ex-
posure to a counterparty arising from a derivative transaction by one
of the following methods. Subject to paragraphs [paragraph] (3) and
(4) of this subsection, a bank shall use the same method for calculating
counterparty credit exposure arising from all of its derivative transac-
tions.
(A) Model [Internal model] method.
(i) Credit exposure. The credit exposure of a deriva-
tive transaction under the [internal] model method is [shall] equal to the
sum of the current credit exposure of the derivative transaction and the
potential future credit exposure of the derivative transaction.
(ii) (No change.)
(iii) Calculation of potential future credit exposure.
A bank shall calculate its potential future credit exposure by using an
internal model that has been approved in writing for purposes of 32(d)
[53] of the federal capital adequacy guidelines, provided that the bank
notifies the commissioner prior to its use for purposes of this section,
or another [approved] model approved by the department based on the
views of the bank's primary federal banking regulatory agency and
any third party testing and evaluation reports submitted to the com-
missioner. Any substantive revisions to an internal model made afterPROPOSED RULES August 30, 2013 38 TexReg 5619
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Texas. Secretary of State. Texas Register, Volume 38, Number 35, Pages 5587-5800, August 30, 2013, periodical, August 30, 2013; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth342086/m1/33/: accessed April 28, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.