U.S. regulator releases new lending limit rule

A pedestrians passes a Citibank branch in Boston, Massachusetts July 17, 2009.

WASHINGTON (Reuters) - The limit on the amount of lending exposure U.S. banks can have to any one counterparty will now include some derivative transactions, under a rule released on Wednesday by the Office of the Comptroller of the Currency.

The 2010 Dodd-Frank financial oversight law required the change as part of a broader effort to better regulate the roughly $700 trillion over-the-counter derivatives market following the 2007-2009 financial crisis.

The change to banks lending exposure is effective July 21 but lenders will have through January 1 to comply with the new rule, the OCC said in a release. The OCC regulates national banks.

U.S. banks currently have limits placed on the amount of loans they can have outstanding to a single counterparty. These limits include, for unsecured loans, lending no more than an amount equal to 15 percent of a bank's capital to one borrower.

To further limit a bank's exposure to any one counterparty, Dodd-Frank expands the definition of what constitutes a credit exposure beyond traditional loans to derivatives and some other transactions, including repurchase agreements.

The rule released on Wednesday puts this change into effect.

The OCC said that in order to make it easier for smaller banks to determine their derivative exposures the rule includes "look-up tables" institutions can reference.

"This method permits institutions to adopt compliance alternatives that fit their size and risk management requirements, consistent with safety and soundness and the goals of the statute," the agency said in a release.

(Editing by Andrea Ricci)