On Friday, October 22, 2010, the DBF announced that it was withdrawing the proposed rule as it relates to the legal lending limit for further study. Both the Georgia Bankers Association and the Community Bankers Association sent the DBF comment letters opposing the change.

Arguments against adopting the proposal were based on two points, one based on legal interpretation and the second on practicalities. The first is that the proposed rule reads into the statute something that is simply not there. If the legislature had wanted to limit the loan renewals to ones that were performing it could have easily done so. The fact that they did not should be read as a decision by the legislature not to limit the renewal provision in that way.

The second point is based on the fact that a restrictive interpretation will put state chartered banks on a competitive disadvantage with national banks. Apparently the OCC does not read its regulations allowing for renewal of loans when the bank’s capital has shrunk to require that a loan be performing in order to be renewed or restructured.

We will keep readers apprised of further developments as they occur.