80-3

STATE BANKING DEPARTMENT
San Francisco, California
August 19, 1980

Dear Mr. ________:
As indicated to you in our meeting today, the enumerated items below are the general guidelines that we look to in evaluating whether a Participation Agreement is a “participation” or a “loan to a financial institution”.
1. A full description of the note and its terms, including the name of the borrower, amount of total loan, and rate of interest.
2. A description of collateral.
3. A detailed description of the procedures pertaining to the handling of participations.
4. A description of the covenants relative to altering or amending the note, notice of default, or other adverse factors.
5. A stipulation of rights to sell or dispose of interest in the loan.
6. A description of the restrictions on the originating bank relative to releasing collateral.
7. A statement of details as to prorating a loss.
8. A clear statement of the responsibility of the initiating bank as to warranties or guarantees.
9. Evidence of participant’s independent credit judgment.
Preliminary information with respect to our current examination of your bank would indicate that some of the above guidelines are not always present for participations sold to . It is our understanding that you intend to review the handling of participations in order to assure that documentation is full and complete so that there is no misunderstanding that they are in fact true participations.
If we can be of any further assistance to you, please do not hesitate to contact us.
Very truly yours,
RICHARD M. DOMINGUEZ
Superintendent of Banks
By
H. DOYLE
Senior Deputy Superintendent