As we’ve previously discussed, the Georgia Department of Banking and Finance had proposed to modify the way in which loans to related entities are treated, among other changes. No material changes to the proposed rules have been made, and the new final rules are effective on September 7, 2009. The new final rules are available from the DBF’s website.
The new rules, effectively consolidating many related party loans, may cause the consolidated relationships to become in technical violation of Georgia’s loans to one borrower rule upon renewal. However, the DBF, in recognition of the current economic environment, has allowed for a transitional phase for loans that were previously made and separately remain in compliance with the DBF’s prior rule on an unconsolidated basis. Those loans should be reworked to comply with the new regulations if feasible, but will otherwise be treated as grandfathered under the prior rules. SoRead More