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.
A bank cannot lend one borrower more than a set share of its own capital, however strong the deal. Under 12 CFR 32.3, a national bank or savings association may have loans and extensions of credit to one borrower of up to 15 percent of its capital and surplus. It may add up to 10 percent more if that extra amount is fully secured by readily marketable collateral, meaning financial instruments and bullion that sell quickly at a quoted market price. Real estate does not qualify for the extra 10 percent.
Example: a bank with $40,000,000 of capital and surplus can hold $6,000,000 for one borrower, and up to $4,000,000 more against listed securities.
The total counts drawn loans, binding commitments to lend and standby letters of credit. Loans to related borrowers can be added together. A piece of a loan sold to another lender without recourse does not count, which is how a small bank can lead a loan larger than its own limit. State-chartered banks follow state law, and the percentages vary by state.
How it shows up in the data here
Each bank page shows an estimated largest single loan: 15 percent of tier 1 capital plus the allowance, from the latest Call Report. It is our estimate of the general limit, not a figure the bank has stated, and a bank's own in-house cap may be lower. Search for banks whose estimate is $5 million or more, or run your own numbers in the lending limit estimate.
Go further
- Legal lending limit estimate: The 15 percent and extra 10 percent amounts for any capital figure.
- Find lenders by loan size: Banks whose estimated largest single loan is $5 million or more.
- 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.
- Loan participations, explained: A participation lets one lender make a loan that is too large for it to hold alone. The borrower signs with one lender. Behind that lender, others own pieces of the loan and share its risk.
Related terms
- Capital and surplus: 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.
- House limit: A cap a bank sets for itself, below the legal lending limit, on how much it will hold for one borrower, one property type or one market.
- 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.
- Loan participation: A loan in which other lenders buy shares from the lender that made it, under a written agreement that keeps the first lender in the loan for its whole life.
- Credit union single borrower limit: The most a credit union may lend in commercial loans to one borrower or group of associated borrowers: the greater of 15 percent of its net worth or $100,000.
- Standby letter of credit: A bank's written promise to pay a third party if the bank's customer does not repay a debt or does not perform an obligation.
Sources
- 12 CFR 32.3, combined general lending limit, retrieved .
- 12 CFR 32.2, lending limit definitions, retrieved .
- 12 CFR 32.5, combination rules, retrieved .
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.