October 26, 1994

Dear M ________:

This letter is to confirm the opinion I gave you in our earlier telephone conversation. Borrowing transactions by California state chartered banks are specifically authorized by Section 1200 of the Financial Code so long as the transaction meets the requirements of Code Sections 1201 through 1205.

In response to your specific inquiry concerning the applicability of Financial Code Section 857 to borrowing transactions, so long as the collateral pledged, (assets hypothecated) does not exceed the 150 percent test specified in Financial Code Section 1201, then the pledging of such collateral to secure the borrowing would not be considered a preference to any creditor under Financial Code 857

I hope the foregoing fully responds to your inquiry.

Yours truly,

Acting Superintendent of Banks


Deputy Superintendent of Banks


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