Assets
Commercial Loans
Comptroller’s Handbook
Narrative - March 1990, Procedures - March 1998
Comptroller of the Currency
Administrator of National Banks
A
(Section 206)
Comptroller’s Handbook
Commercial Loans (Section 206)
i
Commercial Loans
(Section 206)
Table of Contents
Introduction
1
Shared National Credit Program
3
Interagency Country Exposure Review Committee
4
Extensions of Credit to “Insiders”5 5
Extension of Credit to Brokerage Firms
6
Highly Leveraged Transactions
8
Examination Procedures
11
Comptroller’s Handbook
Commercial Loans (Section 206)
1
Commercial Loans
Section (206)
Introduction
“Commercial loans” is a term commonly used to designate loans not ordinarily
maintained by either the real estate or consumer loan departments. In asset
distribution, commercial or business loans frequently comprise one of the most
important assets of a national bank. They may be secured or unsecured and for
short or long-term maturities. Such loans include working capital advances,
term business loans, agricultural credits, and loans to individuals for business
purposes.
Working capital or seasonal loans provide temporary capital in excess of
normal needs. They are used to finance seasonal needs and are repaid at the
end of the cycle by converting inventory and accounts receivable into cash.
Such loans are normally unsecured, although recently more working capital
loans are being advanced with accounts receivable and/or inventory as
collateral. Firms engaged in manufacturing, distribution, retailing, and service-
oriented businesses use short-term working capital loans.
Term business loans have assumed increasing importance in recent years. Such
loans normally are granted for the purpose of acquiring capital assets, such as
plant and equipment. Term loans involve greater risk than do short-term
advances because of the length of time the credit is outstanding. Because of the
greater risk factor, term loans usually are secured a