[Code of Federal Regulations]

[Title 12, Volume 1]

[Revised as of January 1, 2009]

From the U.S. Government Printing Office via GPO Access

[CITE: 12CFR7.1017]

[Page 189-190]

TITLE 12—BANKS AND BANKING

CHAPTER I—COMPTROLLER OF THE CURRENCY, DEPARTMENT OF THE TREASURY

PART 7—BANK ACTIVITIES AND OPERATIONS—Table of Contents

Subpart A—Bank Powers

Sec. 7.1017  National bank as guarantor or surety on indemnity bond.

(a)A national bank may lend its credit, bind itself as a surety to indemnify another, or otherwise become a guarantor (including, pursuant to 12 CFR 28.4, guaranteeing the deposits and other liabilities of its Edge corporations and Agreement corporations and of its corporate instrumentalities in foreign countries), if:

(1)The bank has a substantial interest in the performance of the transaction involved (for example, a bank, as fiduciary, has a sufficient interest in the faithful performance by a cofiduciary of its duties to act as surety on the bond of such cofiduciary); or

(2)The transaction is for the benefit of a customer and the bank obtains from the customer a segregated deposit that is sufficient in amount to cover the bank's total potential liability. A segregated deposit under this section includes collateral:

(i)In which the bank has perfected its security interest (for example, if the collateral is a printed security, the bank must have obtained physical control of the security, and, if the collateral is a book entry security, the bank must have properly recorded its security  interest); and

(ii)That has a market value, at the close of each business day, equal to the bank's total potential liability and is composed of:

(A)Cash;

(B)Obligations of the United States or its agencies;

(C)Obligations fully guaranteed by the United States or its agencies as to principal and interest; or

(D)Notes, drafts, or bills of exchange or bankers' acceptances that are eligible for rediscount or purchase by a Federal Reserve Bank;

or

(iii) That has a market value, at the close of each business day, equal to 110 percent of the bank's total potential liability and is composed of obligations of a State or political subdivision of a State.

(b)In addition to paragraph (a) of this section, a national bank may guarantee obligations of a customer, subsidiary or affiliate that are financial in character, provided the amount of the bank's financial obligation is reasonably ascertainable and otherwise consistent with applicable law.

[61 FR 4862, Feb. 9, 1996, as amended at 64 FR 60099, Nov. 4, 1999; 73 FR 22241, Apr. 24, 2008]