Chap. 148.—An ACT to amend and re-enact Section 48, as heretofore amended, of
an Act entitled, ‘‘An Act to revise, collate and codify into one Act the General
Statutes of the Commonwealth, relating to banks and banking, which act
shall constitute and be designated and cited as the Virginia Banking Act, and
to repeal all Code Sections and all Acts and parts of Acts inconsistent there-
with and to provide penalties for the violations thereof.’’, approved March
27th, 1928, relating to the limit of liability of borrowers and loans on ee 49)

Approved March 6, 1940

1. Be it enacted by the General Assembly of Virginia, That
section forty-eight, as heretofore amended, of an Act entitled, “‘An
Act to revise, collate and codify into one Act the General Statutes of
the Commonwealth, relating to banks and banking, which act shall
constitute and be designated and cited as the Virginia Banking Act,
and to repeal all Code Sections and all Acts and parts of Acts incon-
sistent therewith and to provide penalties for the violation thereof,”’
approved March twenty-seventh, nineteen hundred and twenty-eight,
be amended and re-enacted so as to read as follows:

Section 48. Limit of liability of borrowers; loans on stock.—

(a) The total liabilities of any person, partnership or corporation
to any bank, including the liabilities of the co-partnership, and the
liabilities of the several members thereof, except special partners,
shall at no time exceed fifteen per centum of the capital and per-
manent surplus of such bank. Provided, that such limitation of
fifteen per centum shall be subject to the following exceptions:

(1) Obligations in the form of drafts or bills of exchange drawn
in good faith against actually existing values shall not be subject
under this section to any limitation based upon such capital and
surplus.

(2) Obligations arising out of the discount of commercial or
business paper actually owned by the person, co-partnership, associa-
tion, or corporation negotiating the same shall not be subject under
this section to any limitation based upon such capital and surplus.

(3) Obligations drawn in good faith against actually existing
values and secured by goods or commodities in process of shipment
shall not be subject under this section to any limitation based upon
such capital and surplus.

(4) Obligations as indorser or guarantor of notes, other than
commercial or business paper excepted under (two) hereof, having a
maturity of not more than six months, and owned by the person,
corporation, association, or co-partnership indorsing and negotiating
the same, shall be subject under this section to a limitation of fifteen
per centum of such capital and surplus in addition to such fifteen
per centum of such capital and surplus.

(5) Obligations in the form of banker’s acceptances of other
banks of the kind described in section thirteen of the Federal reserve
act shall not be subject under this section to any limitation based
upon such capital and surplus.

(6) Obligations of any person, co-partnership, association or
corporation, in the form of notes or drafts secured by shipping docu-
ments, warehouse receipts or other such documents transferring or
securing title covering readily marketable non-perishable staples
when such property is fully covered by insurance, if it is customary
to insure such staples, shall be subject under this section to a limita-
tion of fifteen per centum of such capital and surplus in addition to
such fifteen per centum of such capital and surplus when the market
value of such staples securing such obligation is not at any time less
than one hundred and fifteen per centum of the face amount of such
obligation, and to an additional increase of limitation of five per
centum of such capital surplus in addition to such thirty per centum
of such capital and surplus when the market value of such staples
securing such additional obligation is not at any time less than one
hundred and twenty per centum of the face amount of such addi-
tional obligation, and to a further additional increase of limitation
of five per centum of such capital and surplus in addition to such
thirty-five per centum of such capital and surplus when the market
value of such staples securing such additional obligation is not at
any time less than one hundred and twenty-five per centum of the
face amount of such additional obligation, and to a further additional
increase of limitation of five per centum of such capital and surplus
in addition to such forty per centum of such capital and surplus when
the market value of such staples securing such additional obligation
is not at any time less than one hundred and thirty per centum of
the face amount of such additional obligation, and to a further addi-
tional increase of limitation of five per centum of such capital and
surplus in addition to such forty-five per centum of such capital
and surplus when the market value of such staples securing such
additional obligation is not at any time less than one hundred and
thirty-five per centum of the face amount of such additional obliga-
tion, and to a further additional increase of limitation of five per
centum of such capital and surplus in addition to such fifty per
centum of such capital and surplus when the market value of such
staples securing such additional obligation is not at any time less
than one hundred and forty per centum of the face amount of such
additional obligation, but this exception shall not apply to obligations
of any one person, co-partnership, association or corporation arising
from the same transactions and/or secured upon the identical staples
for more than ten months.

(7) Obligations of any person, co-partnership, association, or
corporation in the form of notes or drafts secured by shipping docu-
ments or instruments transferring or securing title covering livestock
or giving a lien on livestock when the market value of the livestock se-
curing the obligation is not at any time less than one hundred and
fifteen per centum of the face amount of the notes covered by such
documents shall be subject under this section to a limitation of
fifteen per centum of such capital surplus in addition to such fifteen
per centum of such capital and surplus.

(8) Obligations of the United States, obligations of the State of
Virginia and of its political subdivisions, including sanitary districts,
obligations issued under authority of the Federal Farm Loan Act,
as amended, or issued by the Federal Home Loan Banks or the Home
Owners’ Loan Corporation, first mortgage real estate loans, which
are insured by the Federal Housing Administrator, obligations guar-
anteed as to principal and interest by the United States, loans in
which Reconstruction Finance Corporation, a Federal Reserve Bank
or either of them, has definitely agreed or committed itself to partici-
pate, to the extent of such participation, and loans which the Federal
Commodity Credit Corporation has definitely agreed to purchase
shall not be subject to any limitations based upon such capital and
surplus.

(9) Obligations of any person, co-partnership, association, or
corporation in the form of notes secured by not less than a like amount
of bonds or notes of the United States, or bonds of the State of Vir-
ginia, shall be subject under this section to a limitation of fifteen
per centum of such capital and surplus, in addition to such fifteen
per centum of such capital and surplus.

(b) No loan shall be made by any bank on the security of shares
of stock in such bank. All loans of every character, in excess of
fifteen per centum of the capital and permanent surplus of any bank
shall be approved by a majority of the board of directors, or by the
executive committee of said board, approved by a majority of such
executive committee, by resolution which shall be recorded in the
minutes of said board or committee, and signed by the directors
present and consenting thereto.

(c) The validity of loans previously made in accordance with
the provisions of this section prior to the amendment shall not be
affected by this amendment, and such loans may from time to time
be renewed, provided such loans shall be reduced or collected in full,
as the case may be, as soon as reasonably possible, so as to conform
to the provisions of this section.