The Federal Reserve extended until Nov. 4 the comment period for its proposal to modernize Regulation O standards on extending credit to bank executives, board members, and major shareholders.
Background: The Fed and FDIC in July proposed rules that they said address a unique challenge for community banks, where board members and executives are often local business owners and civic leaders who need access to credit.
Proposed Changes: The proposals would:
-
Increase the dollar threshold of credit that banks may extend to an executive officer for purposes other than those specifically authorized by statute from $100,000 to $400,000.
-
Raise the dollar threshold for credit that banks may extend to an insider from $500,000 to $2 million, with any aggregate lending beyond this limit requiring approval by the board of directors.
-
Establish an indexing methodology to automatically adjust such thresholds every five years to reflect economic growth and inflation.
-
Simplify the method for determining the lending limit applicable to a given institution.
ICBA View: ICBA supports raising and indexing overly restrictive thresholds such as those found in Reg O—which has not seen a comprehensive update since the 1970s—to better enable community banks to recruit and retain directors, particularly in rural areas.
ICBA Advocacy: ICBA has advocated for the agencies to update Reg O and related rules, including:
-
During the Economic Growth and Regulatory Paperwork Reduction Act review last fall.
-
In recommendations to the Office of Management and Budget.