The capital base a national bank's lending limit is measured against: tier 1 and tier 2 capital plus the part of the loan loss allowance that tier 2 leaves out.
The legal lending limit is a percentage of capital and surplus, so this figure decides the largest loan a bank can hold for one borrower. A bank with twice the capital and surplus can hold a loan twice the size.
Under 12 CFR 32.2 there are two ways to build it. A bank that has elected the community bank leverage ratio uses tier 1 capital plus its allowance for loan losses, as reported in the Call Report. Every other national bank and savings association uses tier 1 and tier 2 capital plus the balance of the allowance that is not counted in tier 2. For a bank whose only tier 2 capital is its allowance, both routes reach the same number: tier 1 capital plus the whole allowance.
The limit is set from the most recent quarter-end figures, so it moves as the bank earns or loses money. Part 32 covers national banks and savings associations. A state-chartered commercial bank follows its own state’s law, which can define the base differently, so ask a state bank which figure it uses.
How it shows up in the data here
Banks do not report capital and surplus as one line that this site carries. Each bank page shows an estimated largest single loan, which is 15 percent of tier 1 capital plus the allowance, our stand-in for the national bank definition. It is an estimate, not a limit the bank has stated. Filter banks by it on the search page.
Go further
- Legal lending limit estimate: Enter capital figures and see the 15 and 10 percent amounts.
- Legal lending limit estimate: The most a bank can lend to one borrower, from public capital figures. Always an estimate.
- The legal lending limit, explained: A bank may not lend more than a set share of its capital to one borrower. The rule explains why a large loan gets shared, and why a lender can say a request is too big for it.
- How to pick banks for a deal with public data: Public filings cannot tell you which bank will say yes. They can tell you which banks are large enough, already hold loans like yours and lend where the property is. That is enough to turn four thousand banks into six phone calls.
Related terms
- Legal lending limit: The most a bank may have outstanding to one borrower by law. For national banks it is 15 percent of capital and surplus, plus 10 percent more when the extra is fully secured by readily marketable collateral.
- Tier 1 capital: A bank's core capital under the capital rule: common equity tier 1 plus additional tier 1. The minimums are 6 percent of risk-weighted assets and a 4 percent leverage ratio.
- Total risk-based capital: The sum of a bank's tier 1 and tier 2 capital. The capital rule requires it to be at least 8 percent of the bank's risk-weighted assets.
- Allowance for credit losses: The reserve a lender builds through charges against earnings for the loan losses it expects, which brings the loans on its books down to the amount it expects to collect.
- Loans to one borrower: The total a bank counts against its lending limit for one borrower: loans, binding commitments and standby letters of credit, plus loans to related parties that the rules combine.
Sources
- 12 CFR 32.2, lending limit definitions, retrieved .
- 12 CFR 32.4, calculation of lending limits, retrieved .
- 12 CFR 32.1, lending limits: authority, purpose and scope, retrieved .
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.