12 C.F.R. § 7.1017

National bank as guarantor or surety on indemnity bond

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(a) A national bank may lend its credit, bind itself as a surety to indemnify another, or otherwise become a guarantor (including, pursuant to 12 CFR 28.4, guaranteeing the deposits and other liabilities of its Edge corporations and Agreement corporations and of its corporate instrumentalities in foreign countries), if:

(1) The bank has a substantial interest in the performance of the transaction involved (for example, a bank, as fiduciary, has a sufficient interest in the faithful performance by a cofiduciary of its duties to act as surety on the bond of such cofiduciary); or

(2) The transaction is for the benefit of a customer and the bank obtains from the customer a segregated deposit that is sufficient in amount to cover the bank's total potential liability. A segregated deposit under this section includes collateral:

(i) In which the bank has perfected its security interest (for example, if the collateral is a printed security, the bank must have obtained physical control of the security, and, if the collateral is a book entry security, the bank must have properly recorded its security interest); and

(ii) That has a market value, at the close of each business day, equal to the bank's total potential liability and is composed of:

(A) Cash;

(B) Obligations of the United States or its agencies;

(D) Notes, drafts, or bills of exchange or bankers' acceptances that are eligible for rediscount or purchase by a Federal Reserve Bank; or

(iii) That has a market value, at the close of each business day, equal to 110 percent of the bank's total potential liability and is composed of obligations of a State or political subdivision of a State.

(b) In addition to paragraph (a) of this section, a national bank may guarantee obligations of a customer, subsidiary or affiliate that are financial in character, provided the amount of the bank's financial obligation is reasonably ascertainable and otherwise consistent with applicable law.

[61 FR 4862, Feb. 9, 1996, as amended at 64 FR 60099, Nov. 4, 1999; 73 FR 22241, Apr. 24, 2008]

Notes of Decisions

Cited in 3 cases, 2005–2008 · leading case: Nw. Servs. Corp. v. Si-Tanka Huron Univ., 2007 SD 32 (S.D. 2007).

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Nw. Servs. Corp. v. Si-Tanka Huron Univ., 2007 SD 32 (S.D. 2007). · cites it 12× “12 CFR § 7.1017 provides: A national bank may lend its credit, bind itself as a surety to indemnify another, or otherwise become a guarantor .”

First Nat. Bank of Omaha v. Eldridge, 756 N.W.2d 167 (Neb. Ct. App. 2008). “See 12 C.F.R. § 7.1017 (a) (2008). [8] "[T]he [National Bank Act] authorizes national banks to issue, market, and service credit cards.”

Shollenburg v. Fed. Deposit Ins., 130 F. App'x 889 (9th Cir. 2005). “§ 1831a and 12 C.F.R. § 7.1017 , which together forbid state-chartered, federally-insured nonmember banks from agreeing to indemnify anyone unless the bank has a substantial interest in the transaction or obtains a segregated deposit in the amount of the indemnification, and…”

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