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Federal R eserve Bank
OF DALLAS
ROBERT
D. M C T E E R , J R .
P R E S ID E N T
DALLAS, TEXAS 75222
A N D C H IE F E X E C U T I V E O F F I C E R
M a y 15, 1992
N otice 92-43
TO:
T h e C h i e f E x e c u t i v e O f f i c e r o f eac h
m e m b e r b a n k and o t h e r s c o n c e r n e d in
t h e E l e v e n t h Federal R e s e r v e D i s t r i c t
SUBJECT
Final A m e n d m e n t s to R e g u l a t i o n 0
(Loans to E x e c u t i v e O ff i c e r s , D i r e c t o r s , and
P ri nc i p a l S h a r e h o l d e r s o f M e m b e r B anks) and R e g u l a t i o n Y
(Ba nk H o l d i n g C o m p a n i e s and C h a n g e in B a n k C o n t r o l )
DETAILS
T h e F ederal R e s e r v e B o a r d has a d o p t e d final a m e n d m e n t s to R e g u l a t i o n
0 ( L o a n s to E x e c u t i v e O f f i c e r s , D i r e c t o r s , and P r i n c i p a l S h a r e h o l d e r s o f
M e m b e r B a n k s ) and R e g u l a t i o n Y ( B ank H o l d i n g C o m p a n i e s and C h a n g e in B a n k
Control).
T h e s e a m e n d m e n t s c o n f o r m the r e g u l a t i o n s to S e c t i o n 3 0 6 o f the
Fed e r a l D e p o s i t I n s u r a n c e C o r p o r a t i o n I m p r o v e m e n t A c t o f 1991 ( F D I CIA).
T h e m o s t s i g n i f i c a n t c h a n g e s r e q u i r e d by S e c t i o n 3 0 6 i n c l u d e a n e w
a g g r e g a t e l e n d i n g l i m i t on the total a m o u n t of c r e d i t a b a n k m a y e x t e n d to its
i n s i d e r s and t h e i r r e l a t e d i n t e r e s t s as a c lass.
In g e n e r a l , t h i s l i m i t is
equal to t h e b a n k ’s u n i m p a i r e d cap i t a l and u n i m p a i r e d s u r p l u s if t h e b a n k ’s
total d e p o s i t s are $ 1 0 0 m i l l i o n more.
T h i s l i m i t is 2 0 0 % o f a b a n k ’s u n i m
p a i r e d c a p i t a l and u n i m p a i r e d s u r p l u s if the b a n k ’s total d e p o s i t s a r e u n d e r
$100 million.
In a d d i t i o n , t h e sa m e l e n d i n g l i m i t a p p l i c a b l e to e x e c u t i v e
o f f i c e r s and p r i n c i p a l s h a r e h o l d e r s and t h e i r r e l a t e d i n t e r e s t s will n o w a p p l y
to e x t e n s i o n s o f c r e d i t to d i r e c t o r s and t h e i r r e l a t e d i n t e r e s t s .
Sect i o n 306 also changes the d e f i n i t i o n of principal shareholder.
F o r m e r l y , a p r i n c i p a l s h a r e h o l d e r w a s any p e r s o n w h o o w n e d or c o n t r o l l e d m o r e
t h a n 10 p e r c e n t o f a c l a s s o f the v o t i n g s h a r e s o f a bank, e x c e p t f o r b a n k s
l o c a t e d in c o m m u n i t i e s w i t h p o p u l a t i o n s o f l e s s t h a n 3 0 , 0 0 0 , in w h i c h c a s e the
a m o u n t w a s 18 p e r c e n t .
T h e 10 p e r c e n t d e f i n i t i o n n o w a p p l i e s to all banks,
r e g a r d l e s s o f t h e siz e o f t he c o m m u n i t y w h e r e t h e b a n k is l o c a t e d .
ATTACHMENT
R-0747)
A c o p y o f t h e B o a r d ’s n o t i c e (Federal
is a t t a c h e d .
R e s e r v e S y s t e m D o c k e t No.
For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas:
Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162,
Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
- 2 -
MORE INFORMATION
F o r m o r e i n f o r m a t i o n , p l e a s e c o n t a c t J a n e A n n e S c h m o k e r(2 1 4 )
at
F o r a d d i t i o n a l c o p i e s o f t h i s B a n k ’s n o t i c e , p l e a s e c o n t a c t t h e
P u b l i c A f f a i r s D e p a r t m e n t at (214) 6 5 1 - 6 2 8 9 .
6 5 1 -6 2 2 8 .
S i n c erely yours,
f id e lity /,
FEDERAL RESERVE SYSTEM
12CFR Parts 215 and 225
[Regulations O and Y; Docket No. R-0747]
Loans to Executive Officers, Directors, and Principal Shareholders of
Member Banks; Bank Holding Companies and Change in Bank
Control
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule.
SUMMARY: The Board is adopting revisions to Regulations O and Y to conform
the regulations to the amendments to § 22(h) of the Federal Reserve Act (12
U.S.C. 375b) made by § 306 of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (“ FDICIA” ). As amended by § 306, § 22(h)
establishes a limit on the total amount a bank may lend to its executive officers,
directors, and principal shareholders, and the related interests of those persons.
Section 22(h), as amended, also subjects extensions of credit to directors and
their related interests to the same lending limit that applies currently to executive
officers and principal shareholders and their related interests under § 22(h). See
12 CFR 215.4(c). The final rule amends Regulation O to implement these
amendments.
The final rule also amends Regulations O and Y to implement a reporting
requirement required by § 306 that relates to certain credit extended to executive
officers and principal shareholders of certain banks and bank holding companies.
In addition, the final rule makes limited technical revisions to Regulation O to
conform the regulation to § 306 and to correct existing ambiguities.
EFFECTIVE DATE: Effective June 15, 1992.
FOR FURTHER INFORMATION CONTACT: Andrew Karp, Attorney (202/452-3554),
Legal Division; Stephen M. Lovette, Manager (202/452-3622), or William G.
Spaniel, Senior Financial Analyst (202/452-3469), Division of Banking
Supervision and Regulation, Board of Governors of the Federal Reserve System.
For the hearing impaired only, Telecommunications Device for the Deaf (TDD),
Dorothea Thompson (202/452-3544), Board of Governors of the Federal Reserve
System, 20th and C Streets, NW., Washington, DC 20551.
SUPPLEMENTARY INFORMATION: Section 22(h) of the Federal Reserve Act (12
U.S.C. 375b) restricts the amount and terms of extensions of credit from a bank
to its executive officers, directors and principal shareholders (collectively,
“ insiders” ) and to any company or political campaign controlled by an insider
(“ related interests” ). The Board promulgated Regulation O in 1978 to implement
this statute. In general, § 22(h):
1.
Requires a bank’s board of directors to approve any extension of credit
to an insider or a related interest in excess of a threshold amount (generally
2
the higher of $25,000 or five percent of the bank’s capital and unimpaired
surplus, up to $500,000);
2. Prohibits any extension of credit on preferential terms;
3. Limits the amount a bank may lend to each of its executive officers and
principal shareholders and their related interests;1 and
4. Prohibits the payment by a bank of an overdraft of an executive officer
or director on an account at the bank.2
On December 19, 1991, the President signed into law the Federal Deposit
Insurance Corporation Improvement Act of 1991 (“ FDICIA” ).3 Section 306 of
the FDICIA amends § 22(h) of the Federal Reserve Act. On February 20, 1992,
the Board published for comment proposed revisions to Regulation O to
implement the amendments of § 22(h) of the Federal Reserve Act made by
FDICIA. The comment period expired on March 23, 1992. The FDICIA
amendments take effect May 18, 1992.
Section 306 of FDICIA replaces the language of § 22(h) with the provisions
of the Board’s Regulation O. Section 306 also makes a number of substantive
modifications to § 22(h). The most significant changes required by the provisions
of FDICIA are as follows:
1. New Aggregate Lending Limit. Section 306 establishes a limit on the total
amount a bank may lend in the aggregate to its insiders and their related interests
as a class. In general, this limit is equal to the bank’s unimpaired capital and
unimpaired surplus.
2. Lending Limit fo r Directors and Related Interests. Section 306 extends
to loans to directors (and their related interests) the same lending limit currently
applicable to executive officers and principal shareholders (and their related
interests) under § 22(h).4 Previously, § 22(h) did not limit the amount directors
and their related interests could borrow from their banks.
3. Credit Standards. Section 306 adds a requirement that, when lending to
an insider, a bank must follow credit underwriting procedures that are “ not less
1 This amoant is 15 percent o f the bank’s unimpaired capital and unimpaired surplus in
the case o f loans that are not fully secured and an additional 10 percent o f the bank’s unimpaired
capital and unimpaired surplus in the case o f loans that are fully secured. In calculating this
limit, all o f the bank’s loans to the insider and the insider’s related interests are aggregated.
This lending limit is subject to the exceptions set forth in § 5200 o f the Revised Statutes (12
U.S.C. 84). These exceptions generally provide higher or no lending limits for loans secured
by various kinds o f obligations. Thus, for example, loans secured by obligations fully guaranteed
by the United States are not subject to a lending limit.
2 The overdraft prohibition does not apply to principal shareholders, unless the principal
shareholder is also an executive officer or director. The prohibition also does not apply to the
related interests o f an executive officer or director. In addition, the prohibition does not apply
to inadvertent overdrafts, as defined in Regulation O.
3 Pub. L. No. 102-242, 105 Stat. 2236 (1991).
4 See note 1, supra.
3
stringent than those applicable to comparable transactions by the bank with
[persons outside the bank].”
4. Definition o f Principal Shareholder. Section 306 tightens the definition
of principal shareholder for banks located in small communities. Formerly, §
22(h) defined a principal shareholder as a person who owned or controlled more
than 10 percent of a class of the voting shares of a bank, except for banks located
in communities with populations of less than 30,000, in which case the amount
was 18 percent. The 10 percent definition now applies to all banks, regardless
of the size of the community where the bank is located.
5. Definition o f Member Bank. Section 306 redefines the term “ member
bank’ ’ for the purposes of § 22(h) to include any subsidiary of the member bank,
clarifying that an extension of credit from a subsidiary of a member bank is
subject to the same insider restrictions as an extension of credit from the member
bank itself.
6. Coverage o f All Companies That Own Banks. Section 306 amends § 22(h)
to cover all companies that own banks, regardless of whether the company is
technically a bank holding company.
7. Prohibition on Knowing Receipt o f Unauthorized Extensions o f Credit.
Section 306 amends § 22(h) to prohibit insiders from knowingly receiving (or
knowingly permitting their related interests to receive) any extension of credit
not authorized by § 22(h).
8. Reporting Requirement fo r Certain Credit. Section 306 requires executive
officers and directors of member banks and bank holding companies without
publicly traded stock to report to their institutions annually the outstanding
amount of any credit that is secured by shares of the insider’s institution.
9. Definitions. Section 306 defines the terms “ company,” “ control,”
“ executive officer,” “ extension of credit,” “ related interest,” and “ subsidiary.”
Each definition is consistent with the corresponding definitions in current
Regulation O.
The final rule adopted by the Board implements these statutory requirements
and contains several technical revisions, discussed below, to conform Regulation
O with § 306 and to correct existing ambiguities.
The proposal the Board published for comment sought only to implement
the FDICIA amendments. The proposal did not modify the regulation where the
statutory amendments track the present regulatory language.5 The Board did not
5
Thus, for example, the existing regulatory definitions o f “ control,” “ executive officer,”
“ extension of credit,” “ overdraft” and “ related interest” remain unchanged, as the new
statutory definitions are fully consistent with the present regulatory definitions.
4
request comment on existing features of Regulation O, except as necessary to
implement the FDICIA amendments.6
The Board received 268 written comments in response to notice of the
proposal. Community or independent banks submitted the majority of comments.
Other commenters included several large banks and bank holding companies,
individual bank directors, numerous state and national banking trade associations,
several state banking superintendents, and four Federal Reserve Banks.
Discussion o f Issues
1. Lending limit applicable to individual directors. The preponderance of
the commenters, including community banks, state and national independent
bankers’ trade associations, and certain state banking supervisors, objected to the
FDICIA requirement that the Regulation O individual lending limit be applied
to loans to directors. These commenters observed that directors of community
banks frequently control substantial local business enterprises, especially in small
or rural communities. In this regard, the commenters stated, such directors
provide to bank management important expertise and valuable credit and deposit
relationships. The commenters asserted nearly unanimously that application of
the Regulation O lending limit to directors would curtail the ability of banks
to serve the credit needs of their directors (and the directors’ related interests).
The commenters concluded that the limit will force directors or prospective
directors to choose between retaining or accepting a directorship and maintaining
a customer relationship with the bank, thereby in turn depriving banks of either
informed leadership or valuable customer relationships.
The final rule implements the director lending limit as proposed. FDICIA
requires that the Board apply this limit to extensions of credit to directors and
their related interests and gives the Board no discretion in applying this aspect
of the statute. It should be noted, however, that directors and their related interests
generally have long been subject to similar borrowing constraints by reason of
the concentration of credit rules under the National Bank Act and state laws.
See, e.g., 12 U.S.C. 84; 12 CFR part 32. The § 22(h) lending limit incorporates
the limits and exceptions of the concentration of credit rules under the National
Bank Act. Thus, the § 22(h) lending limit generally permits each individual
director and his or her related interests to borrow in aggregate amounts the
equivalent of up to 15 percent of the bank’s unimpaired capital and unimpaired
surplus on an unsecured basis and an additional 10 percent on a secured basis.
The exceptions provide higher limits for, or exclude from limitation altogether,
various credit transactions, such as extensions of credit secured by obligations
of the United States or guaranteed by a Federal agency, extensions of credit
secured by bills of lading or warehouse receipts covering readily marketable
staples, and extensions of credit secured by livestock or dairy cattle.
2. Limit on Aggregate Lending to Insiders. As amended by FDICIA, § 22(h)
establishes a limit on the total amount a member bank may lend to its insiders
6
The final rule amends the Board’s Regulation Y to implement a loan reporting
requirement created by the FDICIA that applies to executive officers and directors o f certain
bank holding companies.
5
and their related interests as a class. The statute generally restricts that amount
to an amount that is no greater than the bank’s unimpaired capital and unimpaired
surplus. The Board is authorized, however, to set a more stringent general limit.
The statute permits the Board to make an exception to this limit only for banks
with deposits of less than $100 million and only if the Board determines that
the exception would be “ important to avoid constricting the availability of credit
in small communities or to attract directors to such banks.” 7 The statute provides
that the higher limit for banks with deposits of less than $100 million may not
exceed 200 percent of the bank’s unimpaired capital and unimpaired surplus.
The legislative history of FDICIA indicates that the aggregate limit was
adopted in response to the significant insider lending at Madison National Bank
and other failed institutions.8 In this respect, the aggregate limit was designed
as a prophylactic measure to limit the risks to the deposit insurance system of
large concentrations of credit to institution insiders.
The final rule’s general limit— 100 percent of the member bank’s unimpaired
capital and unimpaired surplus— is the same as provided in the statute.9 The
Board requested specific comment regarding whether to provide an exception
to the general limit for banks with deposits of under $100 million. The Board
also requested comment on whether a 100 percent limit as applied to small banks
would unduly restrict credit or limit the availability of directors. In connection
with these requests, the Board requested that commenters supply specific data
as to the effect of the aggregate limit.
The great preponderance of commenters, including community banks and
bank trade associations, opposed the aggregate limit in principle. Every
commenter that referred to the Board’s discretion to make exceptions to the
general limit for small banks urged the Board to raise that limit to 200 percent
of unimpaired capital and unimpaired surplus for small banks. These commenters
included community banks, larger banks, the American Bankers Association, and
the Independent Bankers Association of America.
The commenters argued the same points discussed above with respect to
the director lending limit. Commenters argued nearly unanimously that the
aggregate limit, like the application of the director lending limit, would inhibit
unduly the ability of community banks to serve the credit needs of their directors
and the related interests of the directors. As a result, commenters contended,
directors will be forced to choose between retaining a directorship or maintaining
a customer relationship with the bank, thereby depriving the bank of either
informed leadership or valuable customer relationships. Apart from anecdotal
7 Federal Deposit Insurance Corporation Improvement Act of 1991, Pub. L. No. 102-242,
§ 306(d), 105 Stat. 2236, 2358 (1991).
8 See S. Rep. No. 167, 102nd Cong., 1st Sess. 55 (1991).
9 Under Regulation O, unimpaired capital and unimpaired surplus is the sum of (1) total
equity capital as reported on the bank’s most recent report of condition; (2) any subordinated
notes and debentures approved as an addition to the bank’s capital structure by the appropriate
federal banking agency; and (3) any valuation reserves created by charges to the bark’s income,
Total equity capital includes retained earnings. See 12 CFR 215.2(h).
6
evidence, commenters did not provide specific information regarding the amount
of lending by banks to their directors and related interests, or other specific
information that would allow the Board to determine the effect of the aggregate
limit on the availability of credit and directors.10
In light of the great concern evidenced by the comments of small banks,
the Board has determined that an exception to the general aggregate lending limit
for small banks is important to avoid constricting the availability of credit or
directors in small communities. Accordingly, the Board has determined to
exercise its discretion under FDICIA to permit small banks {i.e., banks with total
deposits under $100 million) to establish a higher aggregate lending limit for
loans to executive officers, directors, and principal shareholders, and their related
interests, where the board of directors of the bank has determined, based on its
experience with loans to such persons and related interests, that a higher
aggregate lending limit is consistent with prudent, safe, and sound banking
practices. This higher limit must be considered and established by the bank’s
board of directors by resolution, and may not exceed a maximum amount of
200 percent of the bank’s unimpaired capital and unimpaired surplus.
The Board has determined to permit small banks to establish this higher
aggregate limit for a one-year period that will expire May 18, 1993. This oneyear period will enable the Board, in consultation with the other federal banking
agencies, to collect specific data on the lending practices of banks to insiders,
including directors, in order to analyze the effect of a limitation on this lending
on the ability of banks to attract qualified directors and to serve the credit needs
of local communities. The Board will then revisit the issue of an appropriate
limit for small banks.
3. Bank Holding Company Indebtedness under the Aggregate Limit.
A.
Section 23A. Three larger holding companies commented that the
application of the aggregate lending limit to transactions with holding company
affiliates that are also covered by § 23 A of the Federal Reserve Act11 may
produce inconsistent results. Under § 23A, a member bank’s transactions with
any one affiliate are limited to 10 percent of the bank’s capital and surplus; an
aggregate 20 percent limit applies to transactions with all affiliates.12 However,
several types of transactions that present little or no risk to the bank are excluded
from the quantitative limits of § 23A. These transactions include loans that are
fully secured by (i) the obligations of the United States or certain Federal
agencies or (ii) segregated, earmarked deposit accounts.
10 Two community bank commenters submitted data regarding the percentage o f capital
and surplus represented by loans to directors or to other insiders. One demonstrated that loans
to insiders, including directors, exceeded 100 percent o f unimpaired capital and surplus. The
second questioned the necessity o f any limit, on the basis that its loans to insiders, including
directors, fell far short o f 100 percent.
11 12 U.S.C. 371c.
12 Section 23A also applies qualitative restrictions to such transactions. For example, the
transactions must be on terms and conditions that are consistent with safe and sound banking
practices, and the member bank may not purchase low-quality assets from its affiliates.
7
The FDICIA aggregate lending limit does not provide for any exemptions.
Three commenters observed that inclusion under the aggregate lending limit of
holding company indebtedness, including indebtedness exempt from the
quantitative limits of § 23A, could render unavailable a significant portion of
the aggregate lending limit.
The commenters suggested that the Board address this problem by excluding
from the FDICIA aggregate lending limit extensions of credit to parent holding
companies and their non-bank subsidiaries.13 These transactions would continue
to be subject to the requirements of § 23A.
The Board declined to adopt this suggestion. The FDICIA aggregate lending
limit by its terms applies to all extensions of credit by a bank to principal
shareholders and their related interests, thereby covering extensions of credit to
parent holding companies and the companies they control. The FDICIA aggregate
limit provides no exclusion for loans to a parent holding company or its non
bank affiliates. In addition, unlike § 23A, § 22(h) does not provide the Board
general exemptive authority. Thus, the statute requires that bank extensions of
credit to parent holding companies and non-bank affiliates count toward the
aggregate lending limit.
The Board intends to propose legislation to cure the inconsistent treatment
of certain transactions under § 22(h) (as amended by § 306) and § 23A. In this
respect, the Board believes that the best approach would be to exclude loans
to parent holding companies and their non-bank affiliates from § 22(h) altogether
on the basis that such transactions are controlled adequately by § 23A, which
regulates comprehensively inter-affiliate transactions.
B.
National Bank Act. One commenter requested that the Board exclude
from the aggregate lending limit any loan subject to the exceptions provided
under the concentration of credit rules of the National Bank Act.14 For the
reasons discussed with respect to § 23A, the Board declined to implement such
an exemption. To address the problem of inconsistent treatment, the Board
intends to propose legislation to grant to the Board specific authority to define
exclusions from the § 22(h) definition of extension of credit. On the basis of
such authority, the Board could revise Regulation O to exclude from the
aggregate lending limit certain transactions that present little or no risk to the
bank, including transactions that are exempt under the National Bank Act or §
23A.
4.
Definition o f the term “member bank” to include any subsidiary o f the
member bank. As amended by § 306, § 22(h) defines the term “ member bank”
specifically to include any subsidiary of the member bank. The definition is
designed to codify Board policy that an extension of credit made by a subsidiary
of a bank is considered to have been made by the bank itself. The purpose of
the policy is to ensure that an extension of credit from a subsidiary of a member
13 Under existing law and regulations, member bank extensions o f credit to affiliated banks
are exempt in many respects from the coverage of both Regulation O and § 23A.
14 12 U.S.C. 84; 12 CFR part 32.
8
bank is subject to the same insider restrictions as an extension credit from the
member bank itself.15
Two commenters asserted that the definition would have the additional effect
of constituting executive officers and directors of subsidiaries of banks as
executive officers and directors of the parent bank. As a result, the commenters
contended, extensions of credit to insiders of the subsidiaries of banks would
become subject to requirements of Regulation O, including the aggregate lending
limit.16
The commenters argued that the statutory amendment of the term member
bank to include subsidiaries of the bank nullifies the regulatory distinction
between insiders of subsidiaries of the bank and insiders of a bank or its parent
and non-bank affiliates. The commenters urged the Board to clarify that
Regulation O does not cover insiders of subsidiaries of banks (unless they are
also insiders of the bank or its parent or non-bank affiliates).
The final rule retains the proposed definition of member bank, which
specifically includes any subsidiary of the member bank. Prior to the enactment
of FDICIA, Regulation O did not reach the insiders of such subsidiaries, unless
an insider actually- participated in the major policy-making functions of the
bank.17 Accordingly, the Board believes that the inclusion of subsidiary in the
term member bank is not intended to modify the existing policy that Regulation
O does not reach the insiders of subsidiaries of banks (unless an insider is a
bank director or actually participates in major policy-making functions at the
bank).
5.
Elimination o f higher control threshold fo r principal shareholders of
banks located in small communities. Prior to the enactment of FDICIA, § 22(h)
defined a principal shareholder as a person who owns or controls more than 10
percent of a class of the voting shares of a bank, except for banks located in
communities with populations of less than 30,000, in which case the amount
was 18 percent. FDICIA eliminated the exception for banks located in small
communities. As a result, the 10 percent definition now applies to all banks,
regardless of the size of the community where the bank is located.
Several commenters objected to this statutory modification and urged the
Board to preserve the exception. Because the Board has no discretion in the
application of this statutory provision, the final rule eliminates the 18 percent
exception.
13
See 138 Cong. Record S2059, S2077 (daily ed. February 21,1992) (Statement o f Sen.
Riegle).
16 The commenters observed that such a result appears to conflict with an existing provision
of Regulation O, which excludes subsidiaries o f banks from the definition o f subsidiary. See
12 CFR 215.2(n). An effect o f this exclusion has been to remove the insiders o f subsidiaries
o f banks from the requirements o f Regulation O.
17 This is so because under § 215.2(n) o f Regulation O subsidiaries o f banks are not
considered to be parent holding company subsidiaries.
9
6. Coverage o f all companies that own banks. Prior to the enactment of
FDICIA, § 22(h) deemed insiders of bank holding companies to be insiders of
the bank holding companies’ subsidiary banks. This provision reflected the
statutory presumption that insiders of the parent holding company are involved
necessarily in the major decisions of bank subsidiaries. Section 306 amended
§ 22(h) in several places by replacing the term bank holding company with the
term company. This change was intended to ensure that insiders of holding
companies that are not technical bank holding companies are treated in the same
manner as insiders of bank holding companies.18
One commenter, a law firm representing diversified financial holding
companies, argued that this revision would work an especial hardship on such
companies. The commenter asserted that, in contrast to the insiders of bank
holding companies, many insiders of diversified financial holding companies have
no responsibility for, or influence over, the operations of subsidiary banks.
Instead, responsibility for subsidiary banks typically devolves to a small, readily
identifiable group, with most insiders responsible for the company’s primary
business lines, such as manufacturing, retail sales, or insurance. Therefore, the
commenter contended, the regulation as proposed would serve no purpose to the
extent it would constitute as insiders persons who have no ability to influence
the operations of subsidiary banks. The commenter suggested that Board revise
Regulation O to implement a method to exclude from coverage insiders of
diversified parent holding companies who do not supervise subsidiary banks.
The final rule does not include such an exclusion. As amended by § 306,
§ 22(h) presumes that insiders of parent holding companies exercise sufficient
influence over subsidiary banks to be deemed bank insiders. In addition, FDICIA
amended § 22(h) specifically to treat in the same fashion insiders of all companies
that own banks—whether or not the company is technically a bank holding
company. As noted above, the Board has no discretion to exclude such insiders
from the coverage of § 22(h). Accordingly, the Board believes that
implementation of the suggested exclusion would not be consistent with the terms
of § 306.
7. Prohibition on knowing receipt o f any extension o f credit not authorized
by § 22(h). Section 306 amended § 22(h) to prohibit an insider from knowingly
receiving an extension of credit not authorized by § 22(h). Several commenters
requested that the Board refine the prohibition by including in Regulation O a
provision permitting insiders to rely in good faith on a bank’s statement that
an extension of credit is authorized by § 22(h).
This prohibition applies only to knowing receipt of unauthorized extensions
of credit. The Board believes that the reference to knowing receipt adequately
protects insiders in the circumstances cited by the proponents of the good faith
reliance safe-harbor.
18
Riegle).
See 138 Cong. Rec. S2059, S2077 (daily ed. February 21, 1992) (Statement o f Sen.
10
8. Grandfathering provision. FDICIA provides that amendments made by
§ 306 do not affect the validity of any extension of credit or other transaction
lawfully entered into on or before the effective date of the FDICIA amendments.
The effective date of the amendments relating to § 22(h) is the earlier of (i)
the date on which the required revisions to Regulation O become effective or
(ii) 150 days after the date of enactment of the FDICIA. Accordingly, May 18,
1992 is the effective date of the statutory provisions.
Several commenters sought guidance as to the effect of this statutory
provision. The provision applies to the newly limited loans to directors and the
aggregated loans to insiders. As applied to both categories, the provision requires
that banks and insiders comply prospectively after the effective date of the statute
(May 18, 1992). Extensions of credit made before the effective date are not
required to comply with the single borrower limit made applicable to directors
and their related interests or with the aggregate limit on loans to insiders and
their related interests contained in Regulation O. All extensions of credit made
after the effective date (i.e., made after May 18, 1992) must comply with all
of the provisions of the statute and Regulation O. Banks would not be authorized
to extend further credit in amounts that, when aggregated with outstanding loans
to insiders, would exceed either limit.
9. General review o f Regulation O. The Independent Bankers Association
of America requested that, within a year of the promulgation of this final rule,
the Board review Regulation O in its entirety, including aspects of the regulation
on which the Board did not seek comment in connection with the amendments
discussed above. FDICIA mandates that the federal banking agencies conduct
general reviews of the regulations implemented under the statutes they
administer.19 Accordingly, the Board will review Regulation O in its entirety
and the effect of the regulation on bank operations and consider any modifications
that are shown by experience to be necessary or appropriate to carry out the
intent of Congress in this area or to prevent evasions of §§ 22(g) and 22(h).
10. Technical revisions. The final rule also contains several technical
revisions to conform the Regulation O with § 306 and to correct existing
ambiguities. In this respect, for example, the final rule:
(1) Modifies the requirement that member bank loans to executive officers
be “ made subject to the condition that the extension of credit will, at the option
of the memBer bank, become due and payable” to clarify that the condition must
be in writing.
(2) Replaces the term “ bank” with the term “ insured depository institution”
where appropriate to reflect statutory usage.
(3) Provides a dedicated definition of the term “ foreign bank” that is the
same as the existing definition that is provided in the definition of “ member
bank.”
19
Federal Deposit Insurance Corporation Improvement Act of 1991, § 221, 105 Stat. 2236,
2305 (1991).
11
(4) Replaces the term “ capital stock” with the term “ unimpaired capital”
where appropriate to reflect statutory usage.
(5) Adds a date specification to the calculation of valuation reserves for
purposes of determining a member bank’s unimpaired capital and unimpaired
surplus under Regulation O.
(6) Clarifies the definition of extension of credit on which a party may be
liable.
Section-By-Section Analysis:
The following describes the final rule’s amendments of Regulation O.
Section 215.1(a): The final rule adds a reference to FDICIA.
Section 215.2(a): The final rule replaces the term “ bank” with the term
“ depository institution” to reflect statutory usage.
Sections 215.2(c) and (d) and 215.4(c); and redesignated section 215.2(b):
The final rule replaces the term “ bank holding company” with the term
“ company” and removes the reference to the statutory definition of bank holding
company.
Sections 215.2(e) through (1): The final rule redesignates these paragraphs
as paragraphs (g) through (n) to accommodate new paragraphs (e) and (f) of
§ 215.2.
Section 215.2(e): The final rule creates a new paragraph (e) that relocates
the existing Regulation O definition of the term “ foreign bank.” The definition,
which remains unchanged, was previously a parenthetical part of the Regulation
0 definition of “ member bank.”
Section 215.2(f): The final rule creates a new paragraph (f) that defines
the term “ insider.”
Redesignated section 215.2(h): The final rule replaces the regulatory term
“ capital stock” with the statutory term “ unimpaired capital” and adds a date
specification to the definition of valuation reserves for the purposes of calculating
a member bank’s capital.
Redesignated section 215.2(i): The final rule defines the term “ member
bank” to include any subsidiary of the member bank.
Redesignated section 215.2(1): The final rule replaces the phrase “ an
individual or company” with the term “ person” to reflect statutory usage. The
final rule also strikes the sentence that implemented the control standard for
determining “ principal shareholder” of member banks located in communities
with populations of less than 30,000 persons.
Redesignated section 215.2(m): The final rule adds the phrase “ of a
person” to the definition of “ related interest” to reflect statutory usage.
12
Section 215.3(a)(4): The final rule replaces the term “ person” with the term
“ insider” to clarify that the definition applies when the party liable is a bank
insider.
Section 215.3(a)(8): The final rule adds the term “ similar” to reflect
statutory usage.
Section 215.3(b)(2) and (b)(5): The final rule modifies the regulatory
references to conform with the reorganized regulation.
Section 215.4(a)(1): The final rule adds to the existing qualitative
requirements the new requirement that, in extending credit to an insider, a
member bank follow credit underwriting procedures no less stringent than those
prevailing for comparable transactions with non-insiders. In addition, the proposal
proposed to replace the term “ repayment” with the term “ default.” The final
rule retains the term “ repayment.”
Sections 215.4(b)(2) and (3): The final rule reorganizes § 215.4 by
redesignating existing paragraphs (b)(2) and (b)(3) of § 215.4 as paragraphs (b)(3)
and (b)(4) to accommodate new paragraph (b)(2).
Section 215.4(b)(2): The final rule reorganizes § 215.4 by creating a new
paragraph (b)(2) to contain the existing $500,000 limitation. TTie limitation
provision is not modified substantively.
Section 215.4(c): The final rule adds the term “ directors” to the list of
persons subject to the lending limit. This reflects the FDICIA amendment of §
22(h) that extends to loans to directors the § 22(h) lending limit.
Section 215.4(d): The final rule redesignates existing paragraph (d) as
paragraph (e) to accommodate new paragraph (d). New paragraph (d) implements
the aggregate limit on extensions of credit to all insiders as a class mandated
by FDICIA.
Section 215.5(a), footnote 4: The final rule strikes the first sentence to
reflect the FDICIA revisions that amend § 22(g) of the Federal Reserve Act to
cover non-member insured banks. The final rule also modifies regulatory
references to conform them with the reorganized regulation.
Section 215.5(c)(2): The proposal proposed to add the phrase “ the primary”
to clarify that the amount limit under this paragraph applies only to an executive
officer’s primary residence. The final rule does not add the term “ primary.”
Section 215.5(d): The final rule adds the phrase “ in writing” after the term
“ condition” to clarify that the condition required by this paragraph must be in
writing. The proposed rule also proposed to add the term “ corresponding” before
the phrase “ category of credit.” The final rule does not add the term
“ corresponding.”
Sections 215.6 through 215.10: The final rule redesignates these sections
as §§ 215.7 through 215.11 to accommodate new § 215.6.
13
Section 215.6: The final rule creates a new § 215.6 that implements FDICIA
revisions to § 22(h) that prohibit an insider from knowingly receiving (or
knowingly permitting the insider’s related interest from receiving) an extension
of credit that is not authorized under Regulation O.
Section 215.11: The final rule redesignates § 215.11 as § 215.13 and adds
a new § 215.12 to implement the FDICIA requirement that executive officers
and directors of certain member banks report certain credits to the board of
directors of the executive officer’s or director’s member bank.
Redesignated section 215.9: The proposal proposed to add the term
“ corresponding” before the phrase “ category of credit” in redesignated § 215.9.
The final rule does not add term “ corresponding.”
Redesignated section 215.13: The final rule amends this section to refer
to the appropriate civil penalty provisions of the Federal Reserve Act.
The following describes the final rule’s amendment of Regulation Y.
Section 225.4(f): The final rule adds a new paragraph (f) to implement the
FDICIA requirement that executive officers and directors of certain bank holding
companies report certain credits to the board of directors of the executive officer’s
or director’s bank holding company.
Regulatory Flexibility Act Analysis
The final rule implements additional restrictions on member banks’ lending
to their executive officers, directors, and principal shareholders that are required
by § 306 of the FDICIA. The final rule also adds reporting requirements
mandated by FDICIA that relate to certain credit to executive officers and
directors of certain banks and bank holding companies.
The Board expects that these statutorily mandated requirements, such as the
aggregate lending limit, will impose costs on banking organizations, including
small banking organizations. As authorized by FDICIA, however, the Board has
determined to permit banks with total deposits of less than $100 million to
establish a higher aggregate lending limit (not to exceed two times the bank’s
unimpaired capital and unimpaired surplus) under certain circumstances. The
Board has determined to permit the higher limit for a one-year period in order
to enable theBoard to collect data for the purpose of assessing the effect of
the aggregate lending limit on the ability of small banks to attract directors and
to lend.
The final rule does not establish any new substantive, procedural, or
reporting requirements that are not required by FDICIA, with the exception of
a submission required of small banks that establish higher aggregate lending
limits authorized by the regulation. The final rule requires that such small banks
submit to the appropriate federal banking agency and to the Board of Governors
the resolution that records the board of directors’ decision, including a statement
of the bank’s lending to its insiders as a percentage of the bank’s unimpaired
capital and unimpaired surplus.
14
List of Subjects
12 CFR Part 215
Credit, Federal Reserve System, Reporting and recordkeeping requirements,
Security measures.
12 CFR Part 225
Administrative practice and procedure, Appraisals, Banks, Banking, Capital
adequacy, Federal Reserve System, Holding companies, Reporting and
recordkeeping requirements, Securities, State member banks.
For the reasons set forth in this rule, and pursuant to the Board’s authority
under §§ 22(g) and 22(h) of the Federal Reserve Act (12 U.S.C. 375a and 375b),
§ 5(b) of the Bank Holding Company Act (12 U.S.C. 1844(b)), and § 306 of
the Federal Deposit Insurance Corporation Improvement Act of 1991 (Pub. L.
No. 102-242, 105 Stat. 2236 (1991)), the Board is amending 12 CFR part 215
subpart A, and 12 CFR part 225 subpart A as follows:
PART 215— LOANS TO EXECUTIVE OFFICERS, DIRECTORS, AND
PRINCIPAL SHAREHOLDERS OF MEMBER BANKS
Subpart A—Loans by Member Banks to Their Executive Officers, Directors,
and Principal Shareholders
1. The authority citation for part 215 is amended to read as follows:
Authority: Secs. ll(i), 22(g) and 22(h), Federal Reserve Act (12 U.S.C. 248(i),
375a, 375(b)(7)), 12 U.S.C. 1817(k)(3) and 1972(2)(F)(vi), and sec. 306 of the Federal
Deposit Insurance Corporation Improvement Act of 1991 (Pub. L. No 102-242, 105
Stat 2236 (1991)).
2. In part 215, the footnotes are redesignated as shown below:
Section and
paragraph
5215.4(c) ........
§215 .4 (a).........
92 15.5(a).........
§ 2 1 5 5 .............
§ 2 1 5 .1 0 ...........
§215.11 (a )......
§215.11 (b )......
Currant
Number
New num
ber
3
4
5
e
7
8
9
removed
3
4
5
6
7
8
3. 12 CFR 215.1 is amended by revising paragraph (a) to read as follows:
Authority: This subpart is issued pursuant to sections ll(i), 22(g), and 22(h) of
the Federal Reserve Act (12 U.S.C. 248(i), 375a, and 375b), 12 U.S.C. 1817(k)(3),
and section 306 of the Federal Deposit Insurance Corporation Improvement Act of 1991
(Pub. L. No. 102-242, 105 Stat 2236 (1991).
4. 12 CFR 215.2 is amended by revising paragraphs (a), (c), and (d),
redesignating paragraphs (e) through (1) as paragraphs (g) through (n), adding
new paragraphs (e) and (f), and revising redesignated paragraphs (d), (h), (i),
(1), and (m) to read as follows:
15
§215.2
*
*
Definitions.
*
*
*
(a)
Company means any corporation, partnership, trust (business or
otherwise), association, joint venture, pool syndicate, sole proprietorship,
unincorporated organization, or any other form of business entity not specifically
listed herein. However, the term does not include:
(1) An insured depository institution (as defined in 12 U.S.C. 1813) or
(2) A corporation the majority of the shares of which are owned by the
United States or by any State.
*
*
*
*
*
(c) Director o f a member bank includes:
(1) Any director of a member bank, whether or not receiving compensation,
(2) Any director of a company of which the member bank is a subsidiary,
and
(3) Any director of any other subsidiary of that company. An advisory
director is not considered a director if the advisory director
(i) Is not elected by the shareholders of the company or bank,
(ii) Is not authorized to vote on matters before the board of directors, and
(iii) Provides solely general policy advice to the board of directors.
(d) Executive officer of a company or bank means a person who participates
or has authority to participate (other than in the capacity of a director) in major
policymaking functions of the company or bank, whether or not:
(1) The officer has an official title,
(2) The title designates the officer an assistant, or
(3) The officer is serving without salary or other compensation.1 The
chairman of the board, the president, every vice president, the cashier, the
secretary, and the treasurer of a company or bank are considered executive
officers, unless
(i)
The officer is excluded, by resolution of the board of directors or by
the bylaws of the bank or company, from participation (other than in the capacity
of a director) in major policymaking functions of the bank or company, and
1
The term is not intended to include persons who may have official titles and may exercise
a certain measure o f discretion in the performance o f their duties, including discretion in the
making of loans, but who do not participate in the determination o f major policies o f the bank
or company and whose decisions arc limited by policy standards fixed by die senior management
o f the bank or company. For example, the term does not include a manager or assistant manager
of a branch o f a bank unless that individual participates, or is authorized to participate, in
major policymaking functions o f the bank or company.
16
(ii) The officer does not actually participate therein.
For the purpose of §§ 215.4 and 215.8 of this part, an executive officer
of a member bank includes an executive officer of:
(A) A company of which the member bank is a subsidiary, and
(B) Any other subsidiary of that company, unless the executive officer of
the subsidiary
(1) Is excluded (by name or by title) from participation in major
policymaking functions of the member bank by resolutions of the boards of
directors of both the subsidiary and the member bank, and
(2) Does not actually participate in such major policymaking functions.
*
*
*
*
*
(e) Foreign bank has the meaning given in 12 U.S.C. 3101(7).
(f) Insider means an executive officer, director, or principal shareholder, and
includes any related interest of such a person.
H
e
$
$
$
$
(h) The lending limit for a member bank is an amount equal to the limit
of loans to a single borrower established by § 5200 of the Revised Statutes,2
12 U.S.C. 84.
This amount is 15 percent of the bank’s unimpaired capital and unimpaired
surplus in the case of loans that are not fully secured, and an additional 10 percent
of die bank’s unimpaired capital and unimpaired surplus in the case of loans
that are fully secured by readily marketable collateral having a market value,
as determined by reliable and continuously available price quotations, at least
equal to the amount of the loan. The lending limit also includes any higher
amounts that are permitted by § 5200 of the Revised Statutes for the types of
obligations listed therein as exceptions to the limit. A member bank’s unimpaired
capital and unimpaired surplus equals the sum of
(1) The “ total equity capital” of the member bank reported on its most
recent consolidated report of condition filed under 12 U.S.C. 1817(a)(3),
(2) Anjr subordinated notes and debentures approved as an addition to the
member bank’s capital structure by the appropriate federal banking agency, and
(3) Any valuation reserves created by charges to the member bank’s income
reported on its most recent consolidated report of condition filed under 12 U.S.C.
1817(a)(3).
(i) Member bank means any banking institution that is a member of the
Federal Reserve System, including any subsidiary of a member bank. The term
2
Where State law establishes a lending limit for a state member bank that is lower than
the amount permitted in § 5200 o f the Revised Statutes, the lending limit established by
applicable State laws shall be the lending limit for the state member bank.
17
does not include any foreign bank that maintains a branch in the United States,
whether or not the branch is insured (within the meaning of 12 U.S.C. 1813(s))
and regardless of the operation of 12 U.S.C. 1813(h) and 12 U.S.C. 1828(j)(2).
*
*
*
*
*
(1) Principal shareholder means a person (other than an insured bank) that
directly or indirectly, or acting through or in concert with one or more persons,
owns, controls, or has the power to vote more than 10 percent of any class of
voting securities of a member bank or company. Shares owned or controlled by
a member of an individual’s immediate family are considered to be held by the
individual. A principal shareholder of a member bank includes:
(1) A principal shareholder of a company of which the member bank is
a subsidiary, and
(2) A principal shareholder of any other subsidiary of that company.
(m) Related interest of a person means:
(1) A company that is controlled by that person, or
(2) A political or campaign committee that is controlled by that person or
the funds or services of which will benefit that person.
*
*
*
*
*
5.
12 CFR 215.3 is amended by revising paragraphs (a)(4), (a)(8), (b)(2)
and (b)(5) to read as follows:
§ 215.3
Extension of Credit.
( a) * * *
(4) An acquisition by discount, purchase, exchange, or otherwise of any note,
draft, bill of exchange, or other evidence of indebtedness upon which an insider
may be liable as maker, drawer, endorser, guarantor, or surety;
*
*
*
*
*
(8) Any other similar transaction as a result of which a person becomes
obligated to pay money (or its equivalent) to a bank, whether the obligation arises
directly or indirectly, or because of an endorsement on an obligation or otherwise,
or by any means whatsoever.
*
*
*
*
(b) * * *
*
(2)
A receipt by a bank of a check deposited in or delivered to the bank
in the usual course of business unless it results in the carrying of a cash item
for or the granting of an overdraft (other than an inadvertent overdraft in a limited
amount that is promptly repaid, as described in § 215(4)(e) of this part);
*
*
*
*
*
(5) Indebtedness of $5,000 or less arising by reason of any general
arrangement by which a bank:
18
(i) Acquires charge or time credit accounts or
(ii) Makes payments to or on behalf of participants in a bank credit card
plan, check credit plan, interest bearing overdraft credit plan of the type specified
in § 215.4(e) of this part, or similar open end credit plan:
*
*
*
*
*
6.
12 CFR 215.4 is amended by revising paragraphs (a), (b) and (c),
redesignating paragraphs (b)(2) and (b)(3) as paragraphs (b)(3) and (b)(4),
respectively, adding a new paragraph (b)(2), redesignating paragraph (d) as
paragraph (e), and adding a new paragraph (d) to read as follows:
§215.4
Genera! Prohibitions.
(a) * * *
(1) Is made on substantially the same terms (including interest rates and
collateral) as, and following credit underwriting procedures that are not less
stringent than, those prevailing at the time for comparable transactions by the
bank with other persons that are not covered by this part and who are not
employed by the bank, and
(2) * * *
(b) Prior approval. (1) No member bank may extend credit (which term
includes granting a line of credit) to any of its executive officers, directors, or
principal shareholders or to any related interest of that person in an amount that,
when aggregated with the amount of all other extensions of credit to that person
and to all related interests of that person, exceeds the higher of $25,000 or 5
percent of the member bank’s unimpaired capital and unimpaired surplus, unless:
(1) The extension of credit has been approved in advance by a majority of
the entire board of directors of that bank, and
(ii)
The interested party has abstained from participating directly or
indirectly in the voting.
(2) In no event may a member bank extend credit to any one of its executive
officers, directors, or principal shareholders, or to any related interest of that
person, in an amount that, when aggregated with all other extensions of credit
to that person, and all related interests of that person, exceeds $500,000, except
by complying with the requirements of this paragraph.
(3) * * *
( 4) * * *
(c) Lending limit. No member bank may extend credit to any of its executive
officers, directors, or principal shareholders or to any related interest of that
person in an amount that, when aggregated with the amount of all other
extensions of credit by the member bank to that person and to all related interests
of that person, exceeds the lending limit of the member bank specified in §
215.2(h) of this part. This prohibition does not apply to an extension of credit
19
by a member bank to a company of which the member bank is a subsidiary
,or to any other subsidiary of that company.
(d) Aggregate lending limit.
(1) General limit. A member bank may not extend credit to any insider
unless the extension of credit is in an amount that, when aggregated with the
amount of all outstanding extensions of credit by that bank to all of its insiders,
does not exceed the bank’s unimpaired capital and unimpaired surplus (as defined
in § 215.2(h) of this part).
(2) Member banks with deposits o f less than $100,000,000. A member bank
with deposits of less than $100,000,000 may by resolution of its board of
directors increase the general limit specified in paragraph (d)(1) of this section
for the one-year period ending May 18, 1993, to a level not to exceed two times
the bank’s unimpaired capital and unimpaired surplus, if:
(i) The board of directors determines that such higher limit is consistent
with prudent, safe, and sound banking practices in light of the bank’s experience
in lending to its insiders and is necessary to attract or retain directors or to prevent
restricting the availability of credit in small communities;
(ii) The resolution sets forth the facts and reasoning on which the board
of directors bases the finding, including the amount of the bank’s lending to
its insiders as a percentage of the bank’s unimpaired capital and unimpaired
surplus as of the date of the resolution;
(iii) The bank has submitted the resolution to the appropriate Federal
banking agency (as defined in 12 U.S.C. 1813(q)) with a copy to the Board of
Governors; and
(iv) The bank meets or exceeds, on a fully-phased in basis, all applicable
capital requirements established by the appropriate Federal banking agency.
(e) * * *
7.
12 CFR 215.5 is amended by revising redesignated footnote 4 in
paragraphs (a) and (d) to read as follows:
§ 215.5
Additional restrictions on loans to executive officers of member
banks.
(a) * *
*
*
(d)
shall be:
*
*
*
Any extension of credit by a member bank to any of its executive officers
4
Sections 215.5, 215.9, and 215.10 o f this part implement § 22(g) o f the Federal Reserve
Act. For the purposes o f those sections, an executive officer of a member bank does not include
an executive officer o f a bank holding company o f which the member bank is a subsidiary
or any other subsidiary o f that bank holding company.
20
(1) Promptly reported to the member bank’s board of directors;
(2) In compliance with the requirements of § 215.4(a) of this part;
(3) Preceded by the submission of a detailed current financial statement of
the executive officer; and
(4) Made subject to the condition in writing that the extension of credit
will, at the option of the member bank, become due and payable at any time
that the officer is indebted to any other bank or banks in an aggregate amount
greater than the amount specified for a category of credit in paragraph (c) of
this section.
8. 12 CFR 215.11 is redesignated as § 215.13, §§ 215.6 through 215.10
are redesignated as 12 CFR 215.7 through 215.11, respectively, and a new §
215.6 is added to read as follows:
§ 215.6
Prohibition on knowingly receiving unauthorized extension of
credit.
No executive officer, director, or principal shareholder of a member bank
shall knowingly receive (or knowingly permit any of that person’s related
interests to receive) from a member bank, directly or indirectly, any extension
of credit not authorized under this part.
9. A new 12 CFR 215.12 is added to read as follows:
§ 215.12
Reporting requirement for credit secured by certain bank
stock.
Each executive officer or director of a member bank the shares of which
are not publicly traded shall report annually to the board of directors of the
member bank the outstanding amount of any credit that was extended to the
executive officer or director and that is secured by shares of the member bank.
10. Redesignated 12 CFR 215.13 is amended to read as follows:
§ 215.13
Civil penalties.
Any member bank, or any officer, director, employee, agent, or other person
participatingin the conduct of the affairs of the bank, that violates any provision
of this subpart (other than § 215.11) is subject to civil penalties as specified
in § 29 of the Federal Reserve Act (12 U.S.C. 504).
PART 225— BANK HOLDING COMPANIES AND CHANGE IN BANK
CONTROL
1. The authority for part 225 is amended to read as follows:
Authority: 12 U.S.C. 1817(j)(13), 1818, 1831(i), 1843(c)(8), 1844(b), 3106, 3108,
3907, 3909, 3310, and 3331-3351, and sec. 306 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (Pub. L. No. 102-242, 105 StaL 2236 (1991)).
2. 12 CFR 225.4 is amended by adding paragraph (f) to read as follows:
21
(0 Reporting requirement fo r credit secured by certain bank holding
company stock. Each executive officer or director of a bank holding company
the shares of which are not publicly traded shall report annually to the board
of directors of the bank holding company the outstanding amount of any credit
that was extended to the executive officer or director and that is secured by shares
of the bank holding company. For purposes of this paragraph, the terms
“ executive officer” and “ director” shall have the meaning given in § 215.2
of Regulation O, 12 CFR 215.2.
Board of Governors of the Federal Reserve System, May 7, 1992.
(signed) Jennifer J. Johnson
Jennifer J. Johnson,
Associate Secretary of the Board
[FR Doc. 92-00000 Filed 00-00-92; 8:45 am]
BILLING CODE 6210-01 -F
@FedFRASER