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Is there any law or regulation that would prevent trust preferred stock from being used as collateral for a consumer loan? – IBA Compliance Connection

IBA Compliance Connection

Your go to source for compliance!

Is there any law or regulation that would prevent trust preferred stock from being used as collateral for a consumer loan?

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We are unaware of any express prohibition against using trust preferred stock as collateral for a loan, provided that the trust preferred stock has not been issued by the lending bank or its affiliate.  Trust preferred stock is a security, and we are unaware of any rationale why it would be treated differently than other types of securities for purposes of pledging the security as collateral for a loan.