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Oklahoma Administrative Code (Last Updated: March 11, 2021) |
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TITLE 85. State Banking Department |
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Chapter 10. Supervision, Regulation and Administration of Banks, Trust Companies, and the Oklahoma Banking Code |
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Subchapter 11. Substantive Guidelines and Restrictions |
SECTION 85:10-11-20. Leasing
Latest version.
- (1) Authority.(A) A bank may engage in lease financing transactions under Sections 402(17) and 805(C) of the Banking Code.(B) On entering into a lease financing transaction in compliance with this Section, a bank must reasonably expect to realize a return of its full investment in the leased property, plus the estimated cost of financing the property over the term of the lease, from -(i) Rentals;(ii) Estimated tax benefits; and(iii) The estimated residual value of the property at the expiration of the term of the lease.(2) Net lease basis.(A) A net lease is a lease under which the bank will not, directly or indirectly, provide or be obligated to provide for:(i) The servicing, repair or maintenance of the leased property during the lease term.(ii) The purchasing of parts and accessories for the leased property; however, improvements and additions to the leased property may be leased to the lessee upon its request in accordance with any applicable requirements for maximum estimated residual value.(iii) The loan of replacement or substitute property while the leased property is being serviced.(iv) The purchasing of insurance for the lessee, except where the lessee has failed in its contractual obligation to purchase or maintain the required insurance.(v) The renewal of any license or registration for the property unless such action by the bank is necessary to protect its interest as owner or financier of the property.(B) If, in good faith, a bank believes that there has been an unexpected change in conditions which threatens its financial position by significantly increasing its exposure to loss, the limitations contained in subsection (a)(2)(A) of this Section shall not prevent the bank -(i) As the owner and lessor under a net lease, from taking reasonable and appropriate action to salvage or protect the value of the property or its interests arising under the lease; or(ii) As the assignee of a lessor's interest in a lease, from becoming the owner and lessor of the leased property pursuant to its contractual right, or from taking any reasonable and appropriate action to salvage or protect the value of the property or its interests arising under the lease.(C) The limitations contained in subsection (a)(2)(A) of this Section do not prohibit a bank from including any provisions in a lease, or from making any additional agreements, to protect its financial position or investment in the circumstances set forth in subsection (a)(2)(B) of this Section.(D) The limitations contained in subsection (a)(2)(A) of this Section do not prohibit a bank from arranging for any of the services enumerated in subsection (a)(2)(A) of this Section to be provided by a third party to a lessee (at the expense of the lessee) with respect to property leased by the lessee.(3) Investment in personal property.(A) A bank may acquire specific property to be leased only after the bank has entered into either:(i) A legally binding written agreement which indemnifies the bank against loss in connection with its acquisition of the property; or(ii) A legally binding written commitment to lease the property on terms which comply with the provisions of this Section.(B) At the expiration of the lease (including any renewals or extensions with the same lessee), or in the event of a default on a lease agreement prior to the expiration of the lease term, all of the bank's interest in the property shall either be liquidated or re-leased in conformance with this subsection (a) or subsection (b) of this Section, as soon as practicable, but in no event later than two years from the expiration of the lease. Property which the bank retains in anticipation of re-leasing must be revalued at the lower of current fair market value or book value prior to any subsequent lease.(C) Notwithstanding the provisions of subsection (a)(3)(B) of this Section, on the return of leased property at the expiration of a conforming lease term, or on the default of a lessee, a short-term bridge or interim lease is permissible if it otherwise conforms with the net lease requirements of subsection (a) of this Section. Such a short-term bridge or interim lease need not comply with the further requirements of subsection (b) of this Section. Short-term bridge or interim leases may be used pending the sale of off-lease property, or its release as a conforming long-term lease financing transaction.(4) Application of lending limits. Leasing financing trans-actions entered into under this Section are subject to the limitations on loans or extensions of credit under Section 802(A)(1) of the Banking Code. The Commissioner reserves the right to determine that such leases are also subject to the limitations of any other law, regulation or ruling.(b) Leases.(1) General rule. A bank may invest in tangible personal property, including, without limitation, vehicles, manufactured homes, machinery, equipment, or furniture for lease financing transactions on a net lease basis, or may become the owner and lessor of such tangible personal property by purchasing the property from another lessor in connection with its purchase of the related lease; provided that the requirements of subsection (a) of this Section and subsection (b) of this Section are met.(2) Lease term.(A) Lease financing transactions entered into under subsection (b)(1) of this Section must have an initial term of not less than 90 days.(B) The minimum lease term provided for in paragraph (2)(A) of this subsection, shall not be applicable to the acquisition of property subject to an existing lease with a remaining maturity of less than 90 days, provided that, at its inception, such lease was in conformance with the requirements of this Section.