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Letter 22: Credit Concentrations and Compliance with Statutory Lending Limits

The Office of Commissioner of Banking is becoming increasingly concerned about certain lending practices by state banks which result in concentrations of credit. Of particular concern are concentrations arising from loans granted to related companies and/or related companies and their principals, in an obvious attempt to circumvent the lending limitations of Sec. 221.29, Wisconsin Statutes. All such concentrations will be carefully analyzed by this department in order to ascertain compliance with the legal lending limitations provisions of the Wisconsin Statutes. Factors to be considered in this connection are loan purpose; flow of loan proceeds for the possible benefit of one person or business entity; single source of repayment; reliance by lending bank on one underlying common credit factor. If it is determined that the credit arrangement results in the circumvention of the statutory lending limitation, an "overline" will be set up and immediate remedial action will be demanded by this office. This policy will apply to all new extensions of credit as well as renewals of existing lines.

Bkg. Ltr. #22, September 3, 1974, Commissioner Mildenberg