Lease Financing Limited Partnerships

PURPOSE: The National Banking Act, 12 USCA 24(10), by the Competitive Equality Banking Act of 1987, P.L. 100-86, authorizes national banks to invest in tangible personal property for lease financing transactions on a net lease basis. The Office of the Comptroller of the Currency has decided to allow national banks to exercise these powers by acquiring limited partnership interest in limited partnerships which restrict their business to engaging in such transactions. This regulation provides competitive equality between national and state banks by granting the same power to state banks. (1) Definitions. (A) Affiliation shall mean that a general partner either controls, is controlled by or is under common control with the bank and, for purposes of this definition, control shall mean ownership of more than twenty-five percent (25%) of the total voting equity interest of the general partner or the bank. (B) Bank means a state-chartered bank or trust company. (C) Equipment shall mean tangible personal property. (D) Limited partnership shall mean an organization which has met all requirements for formation of a limited partnership under Missouri law. (2) Every bank, directly or through a subsidiary, may invest in tangible personal property. This includes, without limitation, vehicles, manufactured homes, machinery, equipment or furniture for lease financing transactions on a net lease basis, subject to the same terms and conditions as a national banking association pursuant to 12 U.S.C. 14 (Tenth). (3) A bank, in accordance with the provisions of this rule, may exercise its rights to invest in lease financing transactions on a net lease basis by acquiring a limited partnership interest in one (1) or more limited partnerships which engage in these transactions. (4) A lease financing limited partnership, also referred to in this rule as partnership, shall conform to the following conditions: (A) The activities of the partnership shall be strictly limited to investing in equipment for lease financing transactions; (B) The leases shall be net leases as provided in 12 CFR 7.3400 and, accordingly, the partnership shall not provide maintenance, repair or servicing of the equipment to be leased. In addition, the partnership will not engage in daily or short-term equipment leasing or the automobile rental business; (C) The general partner of each limited partnership shall be a reputable business enterprise experienced in equipment leasing and shall have no prior affiliation with the bank; (D) Each limited partner in the partnership shall be a bank, a national banking association, an operating subsidiary of a national banking association, a bank service corporation or a registered bank holding company; (E) Except for each bank’s obligation to make a fixed capital contribution in consideration for its limited partnership interest in an amount set forth in a subscription agreement, each limited partnership agreement shall provide that a bank admitted as a limited partner to each limited partnership shall have no personal liability or obligation for the liabilities and obligations of either the limited partnership or the general partner. Furthermore, each bank admitted as a limited partner to the partnership shall have no obligation to make any advances, loans or additional capital contributions to the partnership; and (F) The partnership may not invest, with respect to any lease customer, an amount in the aggregate which would exceed the amount which the bank could invest in a lease to that customer under section 362.170, RSMo. (5) A bank’s total of investments and extensions of credit in all limited partnerships engaged in the business of owning tangible personal property for lease financing transactions on a net lease basis shall not exceed five percent (5%) of the bank’s assets. The bank’s total equity investment in any one (1) such limited partnership shall not exceed twenty percent (20%) of the bank’s unimpaired capital. (6) The partnership agreement shall provide that the books and records of the partnership shall be available for examination by the commissioner of finance or any examiner designated by him/her at anytime and place s/he shall designate and to the same extent as if the partnership were a bank. In addition, the partnership agreement shall provide that each bank shall have the contractual ability to withdraw as a limited partner if the commissioner determines a withdrawal is necessary under the principles of safe and sound banking, or the laws and rules governing banks. AUTHORITY: sections 361.105, RSMo, 1986 and 362.105, RSMo Supp. 1992.* This rule originally filed as 4 CSR 140-2.150. Original rule filed Sept. 15, 1988, effective Dec. 11, 1988. Amended: Filed Nov. 14, 1989, effective Feb. 11, 1990. Moved to 20 CSR 1140-2.150, effective Aug. 28, 2006. *Original authority: 361.105, RSMo 1967 and 362.105, RSMo 1939, amended 1949, 1963, 1965, 1967, 1977, 1983, 1986, 1990, 1991, 1992.