Regulatory Support for Banks Accepting Stock Warrants

Support for Banks Accepting Stock Warrants

Regulatory guidance supports national banks accepting stock warrants from clients under specific conditions, primarily governed by 12 C.F.R. § 7.1006.

Here’s a breakdown of the key aspects:

1. Legality of Accepting Warrants

• National banks can accept stock warrants as partial or full compensation in loan agreements, commonly known as an “equity kicker.”

• The warrants can be taken in lieu of, or in addition to, interest, but the bank cannot exercise them to avoid direct stock ownership concerns under Section 24(Seventh) of the National Bank Act.