§ 5-512
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/md/financial-institutions/5-512A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
§5–512.
(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)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)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.
(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.
(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)All loans to a director, officer, or employee of a banking institution are subject to the limitations imposed by § 3-601 of this article.