Section 5-512 - Loans to directors, officers, or employees. - Maryland Statutes

§ 5-512. Loans to directors, officers, or employees.
 

(a)  Definitions.-  

(1) In this section the following words have the meanings indicated. 

(2) "Commercial loan" means a loan that is made: 

(i) Solely to acquire or carry on a business or commercial enterprise; or 

(ii) To any business or commercial organization. 

(3) "Consumer loan" means a loan that is made primarily for personal, family, or household purposes. 

(4) "Executive officer" has the meaning stated in Title 12 of the Code of Federal Regulations, § 215.2. 

(b)  In general.- Unless the loan is approved or exempted from approval as provided in this section, the following persons may not borrow, directly or indirectly, any money from a banking institution: 

(1) Any director, officer, or employee of the banking institution; 

(2) Any partnership of which the director, officer, or employee is a member; or 

(3) Any corporation in which the director, officer, or employee is an officer or owns the majority interest. 

(c)  Exception as to directors.- This section does not require approval of: 

(1) A commercial loan that is made to: 

(i) A director of the banking institution, unless the director also is an officer or employee of the banking institution; 

(ii) A partnership of which the director is a member, unless an officer or employee of the banking institution also is a member of that partnership; or 

(iii) A corporation in which the director holds any interest, unless an officer or employee of the banking institution is an officer or owns the majority interest in that corporation; or 

(2) A loan that is: 

(i) A consumer loan; and 

(ii) Is made to an employee of a banking institution who is not an executive officer or director of the banking institution. 

(d)  Required approval.-  

(1) A loan to a director, officer, or employee of a banking institution may be made only if the loan has been approved by a resolution adopted at and recorded in the minutes of a meeting of: 

(i) The board of directors of the banking institution; or 

(ii) The executive committee of the banking institution, if that committee is authorized to make loans. 

(2) If a loan is approved by an executive committee, the loan approval shall be reported to the board of directors at its next meeting. 

(e)  Periodic review; renewals and extensions.-  

(1) A loan made under this section shall be reviewed every 6 months by the board of directors. 

(2) The loan may not be renewed or extended unless the renewal or extension has been approved by a resolution adopted at a meeting of the board of directors and recorded in the minutes of the meeting. 

(f)  Maximum of loans.- All loans to a director, officer, or employee of a banking institution are subject to the limitations imposed by § 3-601 of this article. 
 

[1982, ch. 868; 1993, ch. 277.]