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FED ERA L R E SE R V E BANK O F DALLAS Station K, Dallas, T exas 7 5 2 2 2 Circular No. 84-57 April 25, 1984 TO: All member banks and others concerned in the Eleventh Federal Reserve District ATTENTION: Chief Executive Officer SUBJECT: Regulation 0 — Loans to Executive Officers, Directors and Principal Shareholders of Member Banks SUMMARY: The Board of Governors of the Federal Reserve System has issued a revised Regulation 0 pamphlet as amended effective December 31, 1983. The enclosed pamphlet should be filed in Volume 2 of the Regulations Binders and the previous pamphlet and amendments should be removed. ATTACHMENTS: Regulation 0 pamphlet MORE INFORMATION: Legal Department, Extension 6171 State Member Banks, Extension 6274 ADDITIONAL COPIES: Public Affairs Department, Extension 6289 Banks and others are encouraged to use the following incoming W A TS numbers in contactin g this Bank: 1 - 8 0 0 - 4 4 2 -7 1 4 0 (intrastate) and 1 - 8 0 0 - 5 2 7 - 9 2 0 0 (interstate). For calls placed locally, please use 651 plus the extension referred to above. For Telex calls, please use 79-1 6 8 8. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) Board of Governors of the Federal Reserve System Regulation O Loans to Executive Officers, Directors and Principal Shareholders of Member Banks 12 CFR 215; as amended effective December 31, 1983 Any inquiry relating to this regulation should be addressed to the Federal Reserve Bank of the Federal Reserve District in which the inquiry arises. February 1984 Contents Page Subpart A—Loans by Member Banks to Their Executive Officers, Directors, and Principal Shareholders Section 215.1—Authority purpose, and sc o p e ................................................ (a) A uthority........................................ (b) Purpose and scope.......................... Section 215.2—D efinitions........................ Section 215.3—Extension of credit............ Section 215.4— General prohibitions........ (a) Terms and creditworthiness.......... (b) Prior approval................................ (c) Aggregate lending lim it.................. (d) O verdrafts...................................... Section 215.5—Additional restrictions on loans to executive officers of member banks........................................................ Section 215.6—Extension of credit outstanding on March 10, 1979 ............ Section 215.7—Records of member banks. Section 215.8—Reports by executive officers .................................................... Section 215.9—Report on credit to executive officers.................................... Section 215.10—Disclosure of credit from member banks to executive officers and principal shareholders........ (a) Definitions...................................... (b) Public disclosure............................ 1 1 1 1 3 4 4 4 5 5 5 6 6 6 6 7 7 7 Page (c) Maintaining re c o rd s...................... 7 Section 215.11—Civil penalties.................. 7 Subpart B—Reports on Indebtedness of Executive Officers and Principal Shareholders to Correspondent Banks Section 215.20—Authority, purpose, and sc o p e ................................................ (a) A uthority........................................ (b) Purpose and scope.......................... Section 215.21—D efinitions...................... Section 215.22—Report by executive officers and principal shareholders........ (a) Annual re p o r t................................ (b) Contents of re p o rt.......................... (c) Definitions...................................... (d) Retention of reports at member banks .............................................. (e) Member bank’s responsibility........ Section 215.23—Disclosure of credit from correspondent banks to executive officers and principal shareholders........ 7 7 8 8 8 8 8 9 9 9 9 STATUTORY PROVISIONS Revised Statutes section 5200 .................... 11 Federal Reserve Act section 2 2 .................. 12 Bank Holding Company Act Amendments of 1970 section 106.......... 15 Federal Deposit Insurance Act of 1950 section 7 .................................................. 18 Regulation O Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks* 12 CFR 215; as amended effective December 31, 1983 SUBPART A—LOANS BY MEMBER BANKS TO THEIR EXECUTIVE OFFICERS, DIRECTORS, AN D PRINCIPAL SHAREHOLDERS SECTION 215.1—Authority, Purpose, and Scope (a) Authority. This subpart is issued pursuant to sections 11 (i), 22(g) and 22(h) of the Fed eral Reserve Act (12 USC 248(i), 375a, 375b(7)) and 12 USC 1817(k)(3). (b) Purpose and scope. This subpart governs any extension of credit by a member bank to an executive officer, director, or principal shareholder of (1) the member bank, (2) a bank holding company of which the member bank is a subsidiary, and (3) any other sub sidiary of that bank holding company. It also applies to any extension of credit by a member bank to (1) a company controlled by such a person and (2) a political or campaign com mittee that benefits or is controlled by such a person. This subpart also implements the re porting requirements of 12 USC 375a con cerning extensions of credit by a member bank to its executive officers and of 12 USC 1817(k) concerning extensions of credit by a member bank to its executive officers and principal shareholders. SECTION 215.2—Definitions For the purpose of this subpart, the following definitions apply unless otherwise specified: (a) “Company” means any corporation, part nership, trust (business or otherwise), associ ation, joint venture, pool syndicate, sole pro prietorship, unincorporated organization, or any other form of business entity not specifi cally listed herein. However, the term does * The words “this part,” as used herein, mean Regula tion O (Code of Federal Regulations, title 12, chapter II, part 215). not include (1) an insured bank (as defined in 12 USC 1813(h)) or (2) a corporation the majority of the shares of which are owned by the United States or by any state. (b )(1 ) “Control o f a company or bank” means that a person directly or indirectly, or acting through or in concert with one or more persons: (i) owns, controls, or has the power to vote 25 percent or more of any class of voting securities of the company or bank; (ii) controls in any manner the election of a majority of the directors of the com pany or bank; or (iii) has the power to exercise a control ling influence over the management or policies of the company or bank. (2) A person is presumed to have control, including the power to exercise a control ling influence over the management or poli cies, of a company or bank if: (i) the person is (A ) an executive officer or director of the company or bank and (B) directly or indirectly owns, controls, or has the power to vote more than 10 percent of any class of voting securities of the company or bank; or (ii) (A ) the person directly or indirectly owns, controls, or has the power to vote more than 10 percent of any class of vot ing securities of the company or bank, and (B) no other person owns, controls, or has the power to vote a greater per centage of that class of voting securities. (3) An individual is not considered to have control, including the power to exercise a controlling influence over the management or policies, of a company or bank solely by virtue of the individual’s position as an offi cer or director of the company or bank. (4) A person may rebut a presumption es tablished by paragraph (b )(2 ) of this sec tion by submitting to the appropriate feder al banking agency (as defined in 12 USC 1813(q)) written materials that, in the 1 §215.2 agency’s judgment, demonstrate an absence of control. (c) "Director o f a member bank” includes (1) any director of a member bank, whether or not receiving compensation, (2) any direc tor of a bank holding company (as defined in 12 USC 1841(a)) of which the member bank is a subsidiary, and (3) any director of any other subsidiary of that bank holding compa ny. An advisory director is not considered a director if the advisory director (1) is not elected by the shareholders of the company or bank, (2) is not authorized to vote on matters before the board of directors, and (3) pro vides solely general policy advice to the board of directors. (d) “Executive officer” of a company or bank means a person who participates or has au thority to participate (other than in the ca pacity 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 cash ier, the secretary, and the treasurer of a com pany or bank are considered executive officers, unless (1) the officer is excluded, by resolu tion 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 (2) the officer does not actually participate therein. For the purpose of sec tions 215.4 and 215.7 below, an executive offi cer of a member bank includes an executive officer of (1) a bank holding company (as de fined in 12 USC 1841(a)) of which the mem ber bank is a subsidiary, and (2) any other subsidiary of that bank holding company, un less the executive officer of the subsidiary (i) 1 The term is not intended to include persons who may have official titles and may exercise a certain measure of discretion in the performance of their duties, including dis cretion in the making of loans, but who do not participate in the determination of major policies of the bank or com pany and whose decisions are limited by policy standards fixed by the senior management of the bank or company. For example, the term does not include a manager or assist ant manager of a branch of a bank unless that individual participates, or is authorized to participate, in major policy making functions of the bank or company. 2 Regulation O is excluded (by name or by title) from partici pation in major policymaking functions of the member bank by resolutions of the boards of directors of both the subsidiary and the mem ber bank, and (ii) does not actually partici pate in such major policymaking functions. (e) “Immediate fa m ily” means the spouse of an individual, the individual’s minor children, and any of the individual’s children (includ ing adults) residing in the individual’s home. (f) The “lending lim it” for a member bank is an amount equal to the limit on loans to a single borrower established by section 5200 of the Revised Statutes,2 12 USC 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 addi tional 10 percent of the bank’s unimpaired capital and unimpaired surplus in the case of loans that are fully secured by readily market able collateral having a market value, as de termined by reliable and continuously avail able price quotations, at least equal to the amount of the loan. The lending limit also in cludes any higher amounts that are permitted by section 5200 of the Revised Statutes for the types of obligations listed therein as excep tions to the limit. A member bank’s capital stock and unimpaired surplus equals the sum of (1) the “total equity capital” of the mem ber bank reported on its most recent consoli dated report of condition filed under 12 USC 1817(a)(3), (2) any subordinated notes and debentures approved as an addition to the member bank’s capital struction by the appro priate federal banking agency, and (3) any valuation reserves created by charges to the member bank’s income. (g) “Member bank” means any banking in stitution that is a member of the Federal Re serve System. The term does not include any foreign bank (as defined in 12 USC 3101(7)) that maintains a branch in the United States, whether or not the branch is insured (within the meaning of 12 USC 1813(s)) and regard 2 Where state law establishes a lending limit for a state member bank that is lower than the amount permitted in section 5200 of the Revised Statutes, the lending limit es tablished by applicable state laws shall be the lending limit for the state member bank. Regulation O less of the operation of 12 USC 1813(h) and 12 USC 1828(j)(2). (h) “Pay an overdraft on an account” means to pay an amount upon the order of an ac count holder in excess of funds on deposit in the account. (i) “ Person” means an individual or a company. (j) “Principal shareholder” means an individ ual or a company (other than an insured bank) that directly or indirectly, or acting through or in concert with one or more per sons, owns, controls, or has the power to vote more than 10 percent of any class of voting securities of a member bank or company. However, for the purposes of section 215.4(c) below, this percentage shall be “more than 18 percent” if the member bank is located in a city, town, or village with a population of less than 30,000. 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 in cludes (1) a principal shareholder of a bank holding company (as defined in 12 USC 1841(a)) of which the member bank is a sub sidiary and (2) a principal shareholder of any other subsidiary of that bank holding company. (k) “Related interest” means (1) a company that is controlled by a person or (2) a politi cal or campaign committee that is controlled by a person or the funds or services of which will benefit a person. (/) “Subsidiary” has the meaning given in 12 USC 1841(d), but does not include a subsidi ary of a member bank. SECTION 215.3—Extension of Credit (a) An extension of credit is a making or re newal of any loan, a granting of a line of cred it or an extending of credit in any manner whatsoever, and includes: (1) a purchase under repurchase agree ment of securities, other assets, or obligations; (2) an advance by means of an overdraft, cash item, or otherwise; §215.3 (3) issuance of a standby letter of credit (or other similar arrangement regardless of name or description) or an ineligible ac ceptance, as those terms are defined in sec tion 208.8(d) of this chapter; (4) an acquisition by discount, purchase, exchange, or otherwise of any note, draft, bill of exchange, or other evidence of in debtedness upon which a person may be lia ble as maker, drawer, endorser, guarantor, or surety; (5) a discount of promissory notes, bills of exchange, conditional sales contracts, or similar paper, whether with or without re course; but the acquisition of such paper by a member bank from another bank, without recourse, shall not be considered a discount by the member bank for the other bank; (6) an increase of an existing indebtedness, but not if the additional funds are advanced by the bank for its own protection for (i) accrued interest or (ii) taxes, insurance, or other expenses incidental to the existing indebtedness; (7) an advance of unearned salary or other unearned compensation for a period in ex cess of 30 days; and (8) any other transaction as a result of which a person becomes obligated to pay money (or its equivalent) to a bank, wheth er the obligation arises directly or indirect ly, or because of an endorsement on an obli gation or otherwise, or by any means whatsoever. (b) An extension of credit does not include: (1) an advance against accrued salary or other accrued compensation, or an advance for the payment of authorized travel or oth er expenses incurred or to be incurred on behalf of the bank; (2) a receipt by a bank of a check deposit ed 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 section 215.4(d) below); (3) an acquisition of a note, draft, bill of exchange, or other evidence of indebtedness through (i) a merger or consolidation of 3 §215.3 banks or a similar transaction by which a bank acquires assets and assumes liabilities of another bank or similar organization or (ii) foreclosure on collateral or similar pro ceeding for the protection of the bank, pro vided that such indebtedness is not held for a period of more than three years from the date of the acquisition, subject to extension by the appropriate federal banking agency for good cause; (4) (i) an endorsement or guarantee for the protection of a bank of any loan or oth er asset previously acquired by the bank in good faith or (ii) any indebtedness to a bank for the purpose of protecting the bank against loss or of giving financial assistance to it; or (5) indebtedness of $5,000 or less arising by reason of any general arrangement by which a bank (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 bear ing overdraft credit plan, of the type speci fied in section 215.4(d) below, or similar open-end credit plan, provided: (A ) the in debtedness does not involve prior individual clearance or approval by the bank other than for the purposes of determining au thority to participate in the arrangement and compliance with any dollar limit under the arrangement, and (B) the indebtedness is incurred under terms that are not more favorable than those offered to the general public. (c) Non-interest-bearing deposits to the cred it of a bank are not considered loans, ad vances, or extensions of credit to the bank of deposit; nor is the giving of immediate credit to a bank upon uncollected items received in the ordinary course of business considered to be a loan, advance, or extension of credit to the depositing bank. (d) For purposes of sections 215.4(b) and (c) below, an extension of credit by a member bank is considered to have been made at the time the bank enters into a binding commit ment to make the extension of credit. (e) A participation without recourse is con4 Regulation O sidered to be an extension of credit by the par ticipating bank, not by the originating bank. (f) An extension of credit is considered made to a person covered by this part to the extent that the proceeds of the extension of credit are used for the tangible economic benefit of, or are transferred to, such a person. SECTION 215.4— General Prohibitions (a) Terms and creditworthiness. No member bank may extend credit to any of its executive officers, directors, or principal shareholders or to any related interest of that person unless the extension of credit: (1) is made on sub stantially the same terms, including interest rates and collateral, as 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) does not involve more than the normal risk of repayment or present other un favorable features. (b) Prior approval. (1) No member bank may extend credit (which term includes granting a line of credit) to any of its execu tive officers, directors, or principal share holders 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 inter ests of that person, exceeds the higher of $25,000 or 5 percent of the member bank's capital and unimpaired surplus, unless: (i) the extension of credit has been ap proved 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. In no event may a member bank extend credit to any one of its exec utive officers, directors, or principal shareholders, or to any related interest of that person, in an amount that, when ag gregated with all other extensions of credit to that person, and all related in terests of that person, exceeds $500,000, except by complying with the require ments of this paragraph. §215.5 Regulation O (2) Approval by the board of directors un der paragraph (b)(1) of this section is not required for an extension of credit that is made pursuant to a line of credit that was approved under paragraph (b )(1 ) of this section within 14 months of the date of the extension of credit. The extension of credit must also be in compliance with the re quirements of section 215.4(a) above. (3) Participation in the discussion, or any attempt to influence the voting, by the board of directors regarding an extension of credit constitutes indirect participation in the voting by the board of directors on an extension of credit. (c) Aggregate lending lim it No member bank may extend credit to any of its executive officers or principal shareholders or to any re lated interest of that person3 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 secton 215.2(f) above. This prohibition does not apply to an extension of credit by a member bank to a bank holding company (as defined in 12 USC 1841(a)) of which the member bank is a sub sidiary or to any other subsidiary of that bank holding company. (d) Overdrafts. No member bank may pay an overdraft of an executive officer or director of the bank4 on an account at the bank, unless the payment of funds is made in accordance with (1) a written, preauthorized, interestbearing extension of credit plan that specifies a method of repayment or (2) a written, preauthorized transfer of funds from another account of the account holder at the bank. This prohibition does not apply to payment of 3 This prohibition does not apply to member bank loans to a director of the member bank or to a related interest of the director, unless the director is also an executive officer or principal shareholder. See also the definition of principal shareholder in section 215.2(j) above, in the case of a member bank located in a city, town or village with a popu lation of less than 30,000. 4 This prohibition does not apply to the payment by a member bank of an overdraft of a principal shareholder of the member bank , unless the principal shareholder is also an executive officer or director. This prohibition also does not apply to the payment by a member bank of an overdraft of a related interest of an executive officer, director, or prin cipal shareholder of the member bank. inadvertent overdrafts on an account in an ag gregate amount of $1,000 or less, provided (1) the account is not overdrawn for more than five business days, and (2) the member bank charges the executive officer or director the same fee charged any other customer of the bank in similar circumstances. SECTION 215.5—Additional Restrictions on Loans to Executive Officers of Member Banks (a) No member bank may extend credit to any of its executive officers,5 and no executive officer of a member bank shall borrow from or otherwise become indebted to the bank, ex cept in the amounts, for the purposes, and upon the conditions specified in paragraphs (c) and (d) of this section. (b) No member bank may extend credit in an aggregate amount greater than the amount permitted in paragraph (c) (3) of this section to a partnership in which one or more of the bank’s executive officers are partners and, ei ther individually or together, hold a majority interest. For the purposes of paragraph (c)(3 ) below, the total amount of credit ex tended by a member bank to such partnership is considered to be extended to each executive officer of the member bank who is a member of the partnership. (c) A member bank is authorized to extend credit to any executive officer of the bank— (1) in any amount to finance the education of the executive officer’s children; (2) in any amount to finance the purchase, construction, maintenance, or improvement of a residence of the executive officer, if the extension of credit is secured by a first lien on the residence and the residence is owned (or expected to be owned after the exten sion of credit) by the executive officer; and (3) for any other purpose not specified in section 215.5(c)(1) and (2), if the aggre6 Sections 215.5,215.8, and 215.9 of Regulation O imple ment section 22(g) of the Federal Reserve Act and do not apply to nonmember banks. For the purposes of these sec tions, an executive officer of a member bank does not in clude an executive officer of a bank holding company of which the member bank is a subsidiary or any other subsid iary of that bank holding company. 5 §215.5 gate amount of loans to that officer under this paragraph does not exceed at any one time the higher of 2.5 percent of the bank’s capital and unimpaired surplus or $25,000, but in no event more than $100,000. (d) Any extension of credit by a member bank to any of its executive officers shall be: (1) promptly reported to the member bank’s board of directors; (2) in compliance with the requirements of section 215.4(a) above; (3) preceded by the submission of a detailed cur rent financial statement of the executive offi cer; and (4) made subject to the condition 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 catego ry of credit in paragraph (c) of this section. SECTION 215.6— Extensions of Credit Outstanding on March 10, 1979 (a) Any extension of credit that was out standing on March 10, 1979, and that would, if made on or after March 10, 1979, violate section 215.4(c) above, shall be reduced in amount by March 10, 1980, to be in compli ance with the lending limit in section 215.4(c). Any renewal or extension of such an extension of credit on or after March 10, 1979, shall be made only on terms that will bring the extension of credit into compliance with the lending limit of section 215.4(c) by March 10, 1980. However, any extension of credit made before March 10, 1979, that bears a specific maturity date of March 10, 1980, or later, shall be repaid in accordance with its repayment schedule in existence on or before March 10, 1979. (b) If a member bank is unable to bring all extensions of credit outstanding on March 10, 1979, into compliance as required by para graph (a) of this section, the member bank shall promptly report that fact to the Comp troller of the Currency, in the case of a nation al bank, or to the appropriate Federal Reserve Bank, in the case of a state member bank, and explain the reasons why all the extensions of credit cannot be brought into compliance. The 6 Regulation O Comptroller or the Reserve Bank, as the case may be, is authorized, on the basis of good cause shown, to extend the March 10, 1980, date for compliance for any extension of cred it for not more than two additional one-year periods. SECTION 215.7— Records of Member Banks Each member bank shall maintain records necessary for compliance with the require ments of this part. These records shall (a) identify all executive officers, directors, and principal shareholders of the member bank and the related interests of these persons and (b) specify the amount and terms of each ex tension of credit by the member bank to these persons and to their related interests. Each member bank shall request at least annually that each executive officer, director, or princi pal shareholder of the member bank identify the related interests of that person. SECTION 215.8—Reports by Executive Officers Each executive officer6 of a member bank who becomes indebted to any other bank or banks in an aggregate amount greater than the amount specified for a category of credit in section 215.5(c) above, shall, within 10 days of the date the indebtedness reaches such a level, make a written report to the board of directors of the officer’s bank. The report shall state the lender’s name, the date and amount of each extension of credit, any security for it, and the purposes for which the proceeds have been or are to be used. SECTION 215.9—Report on Credit to Executive Officers Each member bank shall include with (but not as part of) each report of condition (and copy thereof) filed pursuant to 12 USC e See note 5. Regulation O 1817(a)(3) a report of all extensions of credit made by the member bank to its executive officers7 since the date of the bank’s previous report of condition. SECTION 215.10—Disclosure of Credit from Member Banks to Executive Officers and Principal Shareholders (a) Definitions. For the purposes of this sec tion, the following definitions apply: (1) “Principal shareholder of a member bank” means any person8 (other than an insured bank, or a foreign bank as defined in 12 USC 3101(7)) that, directly or indi rectly, owns, controls, or has power to vote more than 10 percent of any class of voting securities of the member bank. The term in cludes a person that controls a principal shareholder (e.g., a person that controls a bank holding company). Shares of a bank (including a foreign bank), bank holding company, or other company owned or con trolled by a member of an individual’s im mediate family are presumed to be owned or controlled by the individual for the pur poses of determining principal shareholder status. (2) “Related interest” means (A ) any company controlled by a person or (B) any political or campaign committee the funds or services of which will benefit a person or that is controlled by a person. For the pur pose of this section and subpart B, a related interest does not include a bank or a foreign bank (as defined in 12 USC 3101(7)). (b) Public disclosure, (i) Upon receipt of a written request from the public, a member bank shall make available the names of each of its executive officers9 and each of its principal shareholders to whom, or to whose related interests, the member bank had outstanding as of the end of the latest 7 See note 5. 8 The term “stockholder of record” appearing in 12 USC 1972(2) (G ) is synonymous with the term “person." 9 For purposes of this section and subpart B, an execu tive officer of a member bank does not include an executive officer of a bank holding company of which the member bank is a subsidiary or of any other subsidiary of that bank holding company unless the executive officer is also an ex ecutive officer of the member bank. § 215.20 previous quarter of the year, an extension of credit that, when aggregated with all other outstanding extensions of credit at such time from the member bank to such person and to all related interests of such person, equaled or exceeded 5 percent of the mem ber bank’s capital and unimpaired surplus or $500,000, whichever amount is less. No disclosure under this paragraph is required if the aggregate amount of all extensions of credit outstanding at such time from the member bank to the executive officer or principal shareholder of the member bank and to all related interests of such a person does not exceed $25,000. (ii) A member bank is not required to dis close the specific amounts of individual ex tensions of credit. (c) Maintaining records. Each member bank shall maintain records of all requests for the information described in paragraph (b) of this section and the disposition of such re quests. These records may be disposed of after two years from the date of the request. SECTION 215.11—Civil Penalties As specified in section 29 of the Federal Re serve Act (12 USC 504), any member bank, or any officer, director, employee, agent, or other person participating in the conduct of the affairs of the bank, that violates any provi sion of this subpart (other than section 215.10) is subject to a civil penalty of not more than $1,000 per day for each day during which the violation continues. SUBPART B—REPORTS ON INDEBTEDNESS OF EXECUTIVE OFFICERS A N D PRINCIPAL SHAREHOLDERS TO CORRESPONDENT BANKS SECTION 215.20—Authority, Purpose, and Scope (a) Authority. This subpart is issued pursuant 7 § 215.20 to section 11 (i) of the Federal Reserve Act (12 USC 248(i) and 12 USC 1972(2) (F)- (vi)). (b) Purpose and scope. This subpart imple ments the reporting requirements of title VIII of the Financial Institutions Regulatory and Interest Rate Control Act of 1978 (FIRA ) (Pub. L. 95-630), as amended by the Gam-St Germain Depository Institutions Act of 1982 (Pub. L. 97-320), 12 USC 1972(2) (G ). Title VIII prohibits (1) preferential lending by a bank to executive officers, directors, and prin cipal shareholders of another bank when there is a correspondent account relationship be tween the banks, and (2) the opening of a correspondent account relationship between banks when there is a preferential extension of credit by one of the banks to an executive offi cer, director, or principal shareholder of the other bank. Regulation O (2) an account maintained in the ordinary course of business solely for the purpose of effecting federal funds transactions at pre vailing market rates or making Eurodollar placements at prevailing market rates. (d) “Correspondent bank” means a bank that maintains one or more correspondent ac counts for a member bank during a calendar year that in the aggregate exceed an average daily balance during that year of $100,000 or 0.5 percent of such member bank’s total de posits (as reported in its first consolidated re port of condition during that calendar year), whichever amount is smaller. (e) “Principal shareholder” and “related in terest” have the meanings provided in section 215.10 of subpart A. SECTION 215.22—Report by Executive Officers and Principal Shareholders SECTION 215.21— Definitions For the purposes of this subpart, the following definitions apply unless otherwise specified: (a) “B ank” has the meaning given in 12 USC 1841(c), and includes a branch or agency of a foreign bank, or a commercial lending compa ny controlled by a foreign bank or by a com pany that controls a foreign bank, where the branch or agency is maintained in a state of the United States or in the District of Colum bia or the commerical lending company is or ganized under state law. (b) “Company,” “control o f a company or bank, ” “executive officer, ” 10 “extension o f credit,” “immediate fa m ily,” and “ person” have the meanings provided in subpart A. (c) “Correspondent account” is an account that is maintained by a bank with another bank for the deposit or placement of funds. A correspondent account does not include: (1) time deposits at prevailing market rates, and 10 See note 9. 8 (a) Annual report. If during any calendar year an executive officer or principal share holder of a member bank or a related interest of such a person has outstanding an extension of credit from a correspondent bank of the member bank, the executive officer or princi pal shareholder shall, on or before January 31 of the following year, make a written report to the board of directors of the member bank.11 (b) Contents o f report. The report required by this section shall include the following information: (1) the maximum amount of indebtedness of the executive officer or principal share holder and of each of that person’s related interests to each of the member banks’s cor respondent banks during the calendar year; (2) the amount of indebtedness of the ex ecutive officer or principal shareholder and of each of that person’s related interests outstanding to each of the member bank’s correspondent banks as of 10 business days 1 Persons reporting under this section are not required 1 to include information on extensions of credit that are fully described in a report by a person they control or a person that controls them, provided they identify their relation ships with such other person. Regulation O before the report required by this section is filed;12 and (3) a description of the terms and condi tions (including the range of interest rates, the original amount and date, maturity date, payment terms, security, if any, and any other unusual terms or conditions) of each extension of credit included in the in debtedness reported under paragraph (b )(1 ) of this section. (c) Definitions. For the purposes of this section: (1) “Indebtedness” means an extension of credit, but does not include: (i) commercial paper, bonds, and deben tures issued in the ordinary course of business; and (ii) consumer credit (as defined in 12 CFR 226.2(p)) in an aggregate amount of $5,000 or less from each of the mem ber bank’s correspondent banks, provid ed the indebtedness is incurred under terms that are not more favorable than those offered to the general public. (2) “Maximum amount of indebtedness” means, at the option of the reporting per son, either (i) the highest outstanding in debtedness during the calendar year for which the report is made, or (ii) the high est end of the month indebtedness outstand ing during the calendar year for which the report is made. (d) Retention o f reports at member banks. The reports required by this section shall be retained at the member bank for a period of three years. The Reserve Bank or the Comp troller, as the case may be, may require these reports to be retained by the bank for an addi tional period of time. The reports filed under this section are not required by this regulation to be made available to the public and shall not be filed with the Reserve Bank or the Comptroller unless specifically requested. 12 If the amount of indebtedness outstanding to a corre spondent bank 10 days before the filing of the report is not available or cannot be readily ascertained, an estimate of the amount of indebtedness may be filed with the report, provided that the report is supplemented within the next 30 days with the actual amount of indebtedness. §215.23 (e) Member bank’ responsibility. Each mem s ber bank shall advise each of its executive offi cers and each of its principal shareholders (to the extent known by the bank) of the reports required by this section and make available to each of these persons a list of the names and addresses of the member bank’s correspon dent banks. SECTION 215.23—Disclosure of Credit from Correspondent Banks to Executive Officers and Principal Shareholders (a) Public disclosure, (i) Upon receipt of a written request from the public, a member bank shall make available the names of each of its executive officers and each of its principal shareholders to whom, or to whose related interests, any correspondent bank of the member bank had outstanding, at any time during the previous calendar year, an extension of credit that, when ag gregated with all other outstanding exten sions of credit at such time from all corre spondent banks of the member bank to such person and to all related interests of such person, equaled or exceeded 5 percent of the member bank’s capital and unimpaired surplus or $500,000, whichever amount is less. No disclosure under this paragraph is required if the aggregate amount of all ex tensions of credit outstanding from all cor respondent banks of the member bank to the executive officer or principal sharehold er of the member bank and to all related interests of such a person does not exceed $25,000 at any time during the previous cal endar year. (ii) A member bank is not required to dis close the specific amounts of individual ex tensions of credit. (b) Maintaining records. Each member bank shall maintain records of all requests for the information described in paragraph (a) of this section and the disposition of such requests. These records may be disposed of after two years from the date of the request. Statutory Provisions Revised Statutes SECTION 5200 (a)(1 ) The total loans and extensions of credit by a national banking association to a person outstanding at one time and not ful ly secured, as determined in a manner con sistent with paragraph (2) of this subsec tion, by collateral having a market value at least equal to the amount of the loan or ex tension of credit shall not exceed 15 per centum of the unimpaired capital and un impaired surplus of the association. (2) The total loans and extensions of credit by a national banking association to a per son outstanding at one time and fully se cured by readily marketable collateral hav ing a market value, as determined by reli able and continuously available price quota tions, at least equal to the amount of the funds outstanding shall not exceed 10 per centum of the unimpaired capital and un impaired surplus of the association. This limitation shall be separate from and in ad dition to the limitation contained in para graph (1) of this subsection. (b) For the purposes of this section— (1) the term “loans and extensions of cred it” shall include all direct or indirect ad vances of funds to a person made on the basis of any obligation of that person to re pay the funds or repayable from specific property pledged by or on behalf of the per son and, to the extent specified by the Comptroller of the Currency, such term shall also include any liability of a national banking association to advance funds to or on behalf of a person pursuant to a contrac tual commitment; and (2) the term “person” shall include an in dividual, sole proprietorship, partnership, joint venture, association, trust, estate, busi ness trust, corporation, sovereign govern ment or agency, instrumentality, or politi cal subdivision thereof, or any similar entity or organization. (c) The limitations contained in subsection (a) shall be subject to the following exceptions: (1) Loans or extensions of credit arising from the discount of commercial or busi ness paper evidencing an obligation to the person negotiating it with recourse shall not be subject to any limitation based on capital and surplus. (2) The purchase of bankers’ acceptances of the kind described in section 13 of the Federal Reserve Act and issued by other banks shall not be subject to any limitation based on capital and surplus. (3) Loans and extensions of credit secured by bills of lading, warehouse receipts, or similar documents transferring or securing title to readily marketable staples shall be subject to a limitation of 35 per centum of capital and surplus in addition to the gener al limitations if the market value of the sta ples securing each additional loan or exten sion of credit at all times equals or exceeds 115 per centum of the outstanding amount of such loan or extension of credit. The sta ples shall be fully covered by insurance whenever it is customary to insure such staples. (4) Loans or extensions of credit secured by bonds, notes, certificates of indebtedness, or Treasury bills of the United States or by other such obligations fully guaranteed as to principal and interest by the United States shall not be subject to any limitation based on capital and surplus. (5) Loans or extensions of credit to or se cured by unconditional takeout commit ments or guarantees of any department, agency, bureau, board, commission, or es tablishment of the United States or any cor poration wholly owned directly or indirect ly by the United States shall not be subject to any limitation based on capital and surplus. (6) Loans or extensions of credit secured by a segregated deposit account in the lend ing bank shall not be subject to any limita tion based on capital and surplus. (7) Loans or extensions of credit to any 11 Regulation O Statutory Provisions financial institution or to any receiver, con servator, superintendent of banks, or other agent in charge of the business and property of such financial institution, when such loans or extensions of credit are approved by the Comptroller of the Currency, shall not be subject to any limitation based on capital and surplus. (8) (A) Loans and extensions of credit arising from the discount of negotiable or nonnegotiable installment consumer pa per which carries a full recourse endorse ment or unconditional guarantee by the person transferring the paper shall be subject under this section to a maximum limitation equal to 25 per centum of such capital and surplus, notwithstanding the collateral requirements set forth in sub section (a)(2 ). (B) If the bank’s files or the knowledge of its officers of the financial condition of each maker of such consumer paper is reasonably adequate, and an officer of the bank designated for that purpose by the board of directors of the bank certifies in writing that the bank is relying primarily upon the responsibility of each maker for payment of such loans or extensions of credit and not upon any full or partial recourse endorsement or guarantee by the transferor, the limitations of this sec tion as to the loans or extensions of credit of each such maker shall be the sole ap plicable loan limitations. (9) (A) Loans and extensions of credit se cured by shipping documents or instru ments transferring or securing title cover ing livestock or giving a lien on livestock when the market value of the livestock securing the obligation is not at any time less than 115 per centum of the face amount of the note covered, shall be sub ject under this section, notwithstanding the collateral requirements set forth in subsection (a) (2), to a maximum limita tion equal to 25 per centum of such capi tal and surplus. (B) Loans and extensions of credit which arise from the discount by dealers in dairy cattle of paper given in payment for dairy cattle, which paper carries a full recourse endorsement or unconditional 12 guarantee of the seller, and which are se cured by the cattle being sold, shall be subject under this section, notwithstand ing the collateral requirements set forth in subsection (a )(2 ), to a limitation of 25 per centum of such capital and surplus. (10) Loans or extensions of credit to the Student Loan Marketing Association shall not be subject to any limitation based on capital and surplus. (d )(1 ) The Comptroller of the Currency may prescribe rules and regulations to ad minister and carry out the purposes of this section, including rules or regulations to de fine or further define terms used in this sec tion and to establish limits or requirements other than those specified in this section for particular classes or categories of loans or extensions of credit. (2) The Comptroller of the Currency also shall have authority to determine when a loan putatively made to a person shall for purposes of this section be attributed to an other person. [12 USC 84. As amended by acts of June 22, 1906 (34 Stat. 451); Sept. 24, 1918 (40 Stat. 967); Oct. 22, 1919 (41 Stat. 296); Feb. 25, 1927 (44 Stat. 1229); May 20, 1933 (48 Stat. 72); June 16, 1933 (48 Stat. 191); Aug. 23, 1935 (49 Stat. 713); June 11, 1942 (56 Stat. 356); July 15, 1949 (63 Stat. 440); Aug. 25, 1958 (72 Stat. 841); Sept. 9, 1959 (72 Stat. 488); Sept. 28, 1962 (76 Stat. 672); Joint Resolution of May 25, 1967 (81 Stat. 29); June 23, 1972 (86 Stat. 270); Oct. 15, 1982 (96 Stat. 1508); and Jan. 12, 1983 (96 Stat. 2509).] FEDERAL RESERVE ACT SECTION 22—Offenses of Examiners, Member Banks, Officers, and Directors * * * * * (g )(1 ) Except as authorized under this sub section, no member bank may extend credit in any manner to any of its own executive officers. No executive officer of any member bank may become indebted to that member bank except by means of an extension of credit which the bank is authorized to make under this subsection. Any extension of credit under this subsection shall be Regulation O promptly reported to the board of directors of the bank, and may be made only if— (A ) the bank would be authorized to make it to borrowers other than its officers; (B) it is on terms not more favorable than those afforded other borrowers; (C ) the officer has submitted a detailed current financial statement; and (D ) it is on condition that it shall be come due and payable on demand of the bank at any time when the officer is in debted to any other bank or banks on ac count of extensions of credit of any one of the three categories respectively re ferred to in paragraphs (2), (3), and (4) in an aggregate amount greater than the amount of credit of the same category that could be extended to him by the bank of which he is an officer. (2) With the specific prior approval of its board of directors, a member bank may make a loan to any executive officer of the bank if, at the time the loan is made— (A ) it is secured by a first lien on a dwell ing which is expected, after the making of the loan, to be owned by the officer and used by him as his residence, and (B) no other loan by the bank to the of ficer under authority of this paragraph is outstanding. (3) A member bank may make extensions of credit to any executive officer of the bank, to finance the education of the chil dren of the officer. (4) A member bank may make extensions of credit not otherwise specifically autho rized under this subsection to any executive officer of the bank, in an amount prescribed in a regulation of the member bank’s appro priate Federal banking agency. (5) Except to the extent permitted under paragraph (4), a member bank may not ex tend credit to a partnership in which one or more of its executive officers are partners having either individually or together a ma jority interest. For the purposes of para graph (4), the full amount of any credit so extended shall be considered to have been extended to each officer of the bank who is a member of the partnership. (6) Whenever an executive officer of a Statutory Provisions member bank becomes indebted to any bank or banks (other than the one of which he is an officer) on account of extensions of credit of any one of the three categories re spectively referred to in paragraphs (2), (3), and (4) in an aggregate amount great er than the aggregate amount of credit of the same category that could lawfully be ex tended to him by the bank, he shall make a written report to the board of directors of the bank, stating the date and amount of each such extension of credit, the security therefor, and the purposes for which the proceeds have been or are to be used. (7) This subsection does not prohibit any executive officer of a member bank from en dorsing or guaranteeing for the protection of the bank any loan or other asset previ ously acquired by the bank in good faith or from incurring any indebtedness to the bank for the purpose of protecting the bank against loss or giving financial assistance to it. (8) Each day that any extension of credit in violation of this subsection exists is a continuation of the violation for the purpos es of section 8 of the Federal Deposit Insur ance Act. (9) Each member bank shall include with (but not as part of) each report of condi tion and copy thereof filed under section 7 (a)(3 ) of the Federal Deposit Insurance Act a report of all loans under authority of this subsection made by the bank since its previous report of condition. (10) The Board of Governors of the Fed eral Reserve System may prescribe such rules and regulations, including definitions of terms as it deems necessary to effectuate the purposes and to prevent evasions of this subsection. [12 USC 375a. As added by act of June 16, 1933 (48 Stat. 182); amended by Public Resolution approved June 14, 1935 (49 Stat. 375); and by acts of Aug. 23, 1935 (49 Stat. 716); April 25, 1938 (52 Stat. 223); June 20, 1939 (53 Stat. 842); July 3, 1967 (81 Stat. 109) and Nov. 10, 1978 (92 Stat. 3665).] (h)(1) No member bank shall make any loan or extension of credit in any manner to any of its executive officers, or to any person who directly or indirectly or acting through or in concert with one or more persons 13 Statutory Provisions owns, controls, or has the power to vote more than 10 per centum of any class of voting securities of such member bank, ex cept in the case of such a bank located in a city, town, or village with less than thirty thousand in population, in which case such per centum shall be 18 per centum, or to any company controlled by such an execu tive officer or person, or to any political or campaign committee the funds or services of which will benefit such an executive offi cer or person or which is controlled by such an executive officer or person, where the amount of such loan or extension of credit, when aggregated with the amount of all other loans or extensions of credit then out standing by such bank to such executive of ficer or person and to all companies con trolled by such executive officer or person and to all political or campaign committees the funds or services of which will benefit such executive officer or person or which are controlled by such executive officer or person, would exceed the limits on loans to a single borrower established by section 5200 of the Revised Statutes, as amended. For purposes of this paragraph, the provi sions of section 5200 of the Revised Stat utes, as amended, shall be deemed to apply to a State member bank as if such State member bank were a national banking association. (2) No member bank shall make any loan or extension of credit in any manner to any of its executive officers or directors, or to any person who 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 per centum of any class of voting securities of such mem ber bank, or to any company controlled by such an executive officer, director, or per son, or to any political or campaign com mittee the funds or services of which will benefit such executive, director, or person or which is controlled by such executive of ficer, director, or person, where the amount of such loan or extension of credit, when aggregated with the amount of all other loans or extensions of credit then outstand ing by such bank to such executive officer, director, or person and to all companies Regulation O controlled by such executive officer, direc tor, or person and to all political or cam paign committees the funds or services of which will benefit such executive officer, di rector, or person or which are controlled by such executive officer, director, or person, would exceed an amount prescribed in a regulation of the appropriate Federal bank ing agency, unless such loan, line of credit, or extension of credit is approved in ad vance by a majority of the entire board of directors with the interested party abstain ing from participating directly or indirectly in the voting. (3) No member bank shall make any loan or extension of credit in any manner to any of its executive officers or directors, or to any person who directly or acting through or in concert with one or more persons, owns, controls, or has the power to vote more than 10 per centum of any class of voting securities of such member bank, or to any company controlled by such execu tive, officer, director, or person, or to any political or campaign committee the funds or services of which will benefit such execu tive officer, director, or person or which is controlled by such executive officer, direc tor, or person, unless such loan or extension of credit is made on substantially the same terms, including interest rates and collater al, as those prevailing at the time for com parable transactions with other persons and does not involve more than the normal risk of repayment or present other unfavorable features. (4) No member bank may pay an over draft on an account at such bank of an ex ecutive officer or director. (5) For purposes of this subsection, an ex ecutive officer, director, or person shall be considered to have control of a company if such executive officer, director, or person, directly or indirectly or acting through or in concert with one or more other persons— (A ) owns, controls, or has power to vote 25 per centum or more of any class of voting securities of the company; (B) controls in any manner the election of a majority of the directors of the com pany; or Regulation O (C) has the power to exercise a control ling influence over the management or policies of such company. (6) For the purposes of this subsection— (A ) the term “person” means an indi vidual or company; (B) the term “company” means any corporation, partnership, business trust, association, joint venture, pool syndicate, sole proprietorship, unincorporated orga nization, any other form of business enti ty not specifically listed herein, or any other trust, but shall not include any in sured bank or any corporation the major ity of shares of which is owned by the United States or by any State; (C ) a person shall be deemed to be a “director of a member bank” or a “per son who directly or acting through or in concert with one or more persons owns, controls, or has power to vote more than 10 per centum of any class of voting secu rities of a member bank” if such person has such relationship with any bank holding company of which such member is a subsidiary, as defined by the Bank Holding Company Act (12 U.S.C. 1841), or with any other subsidiary of such bank holding company; (D ) a person shall be deemed to be an “officer” of a member bank if such per son is an officer of any bank holding com pany of which such member bank is a subsidiary, as defined by the Bank Hold ing Company Act (12 U.S.C. 1841), or with any other subsidiary of such bank holding company; (E ) the term “executive officer” has the same meaning assigned such term under section 22(g) of this Act; and (F ) the term “pay an overdraft on an account” means the payment by a mem ber bank of an amount for an account holder in excess of the funds on deposit in the account and does not include a payment of funds by the member bank in accordance with either a written preau thorized, interest-bearing extension of credit specifying a method repayment or a written preauthorized transfer of funds from another account of the account holder at that bank. Statutory Provisions (7) The Board of Governors of the Federal Reserve System may prescribe such rules and regulations, including definitions of terms, as it deems necessary to effectuate the purposes and to prevent evasions of this subsection. The Board may further pre scribe rules providing a reasonable period of time after the date of enactment of this subsection within which the amount of out standing loans or extensions of credit made prior to such date of enactment shall be re duced so as to conform to the limitations of this subsection. [ 12 USC 375b. As added by act of Nov. 10, 1978 (92 Stat. 3644).] BANK HOLDING COMPANY ACT AMENDMENTS OF 1970 SECTION 106—Tie-In Arrangements * * * * * (b )(1 ) A bank shall not in any manner ex tend credit, lease or sell property of any kind, or furnish any service, or fix or vary the consideration for any of the foregoing, on the condition or requirement— (A ) that the customer shall obtain some additional credit, property, or service from such bank other than a loan, dis count, deposit, or trust service; (B) that the customer shall obtain some additional credit, property, or service from a bank holding company of such bank, or from any other subsidiary of such bank holding company; (C) that the customer provide some ad ditional credit, property, or service to such bank, other than those related to and usually provided in connection with a loan, discount, deposit, or trust service; (D ) that the customer provide some ad ditional credit, property, or service to a bank holding company of such bank, or to any other subsidiary of such bank holding company; or (E ) that the customer shall not obtain some other credit, property, or service from a competitor of such bank, a bank 15 Statutory Provisions holding company of such bank, or any subsidiary of such bank holding compa ny, other than a condition or requirement that such bank shall reasonably impose in a credit transaction to assure the soundness of the credit. The Board may by regulation or order permit such excep tions to the foregoing prohibition as it considers will not be contrary to the pur poses of this section. (2) (A) No bank which maintains a corre spondent account in the name of another bank shall make an extension of credit to an executive officer or director of, or to any person who 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 per centum of any class of voting securities of, such other bank, or to any related interest of such person, unless such extension of credit is made on substantially the same terms, including interest rates and collat eral as those prevailing at the time for comparable transactions with other per sons and does not involve more than the normal risk of repayment or present oth er unfavorable features. (B) No bank shall open a correspondent account at another bank while such bank has outstanding an extension of credit to an executive officer or director of, or oth er person who 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 per centum of any class of voting securities of, the bank desiring to open the account, or to any related interest of such person, unless such extension of credit was made on substantially the same terms, including interest rates and collateral as those pre vailing at the time for comparable trans actions with other persons and does not involve more than the normal risk of re payment or present other unfavorable features. (C) No bank which maintains a corre spondent account at another bank shall make an extension of credit to an execu tive officer or director of, or to any per son who directly or indirectly acting Regulation O through or in concert with one or more persons owns, controls, or has the power to vote more than 10 per centum of any class of voting securities of, such other bank, or to any related interest of such person, unless such extension of credit is made on substantially the same terms, in cluding interest rates and collateral as those prevailing at the time for compara ble transactions with other persons and does not involve more than the normal risk of repayment or present other unfa vorable features. (D ) No bank which has outstanding an extension of credit to an executive officer or director of, or to any person who di rectly or indirectly or acting through or in concert with one or more persons owns, controls, or has the power to vote more than 10 per centum of any class of voting securities of, another bank, or to any related interest of such person shall open a correspondent account at such other bank, unless such extension of credit was made on substantially the same terms, including interest rates and collateral as those prevailing at the time for comparable transactions with other persons and does not involve more than the normal risk of repayment or present other unfavorable features. (E ) For purposes of this paragraph, the term “extension of credit” shall have the same meaning given it in section 23A of the Federal Reserve Act and the term “executive officer” shall have the same meaning given it under section 22(g) of the Federal Reserve Act. (F )(i) Any bank which violates or any officer, director, employee, agent, or other person participating in the con duct of the affairs of such bank who violates any provision of section 106(b)(2) shall forfeit and pay a civil penalty of not more than $1,000 per day for each day during which such violation continues: Provided, That the agency having authority to impose a civil money penalty may, in its discre tion, compromise, modify, or remit any civil money penalty which is sub ject to imposition or has been imposed Regulation O under such authority. The penalty may be assessed and collected by the Comp troller of the Currency in the case of a national bank, the Board in the case of a State member bank, or the Federal Deposit Insurance Corporation in the case of an insured nonmember State bank, by written notice. As used in this section, the term “violates” includes without any limitation any action (alone or with another or others) for or toward causing, bringing about, participating in, counselling, or aiding or abetting a violation. (ii) In determining the amount of the penalty the Comptroller of the Curren cy, the Board or the Federal Deposit Insurance Corporation, as the case may be, shall take into account the ap propriateness of the penalty with re spect to the size of the financial re sources and good faith of the bank or person charged, the gravity of the vio lation, the history of previous viola tions, and such other matters as justice may require. (iii) The bank or person assessed shall be afforded an opportunity for agency hearing, upon request made within ten days after issuance of the notice of as sessment. In such hearing, all issues shall be determined on the record pur suant to section 554 of title 5, United States Code. The agency determination shall be made by final order which may be reviewed only as provided in sub section (iv). If no hearing is requested as herein provided, the assessment shall constitute a final and unappeala ble order. (iv) Any bank or person against whom an order imposing a civil money penalty has been entered after agency hearing under this section may obtain review by the United States court of appeals for the circuit in which the home office of the bank is located, or the United States Court of Appeals for the District of Columbia Circuit, by fil ing a notice of appeal in such court within twenty days from the service of such order, and simultaneously send Statutory Provisions ing a copy of such notice by registered or certified mail to the Comptroller of the Currency, the Board or the Federal Deposit Insurance Corporation, as the case may be. The Comptroller of the Currency, the Board or the Federal Deposit Insurance Corporation, as the case may be, shall promptly certify and file in such court the record upon which the penalty was imposed, as provided in section 2112 of title 28, United States Code. The findings of the Comptroller of the Currency, the Board or the Federal Deposit Insur ance Corporation, as the case may be, shall be set aside if found to be unsup ported by substantial evidence as pro vided by section 706(2) (E) of title 5, United States Code. (v) If any bank or person fails to pay an assessment after it has become a fi nal and unappealable order, or after the court of appeals has entered final judgment in favor of the agency, the Comptroller of the Currency, the Board or the Federal Deposit Insur ance Corporation, as the case may be, shall refer the matter to the Attorney General, who shall recover the amount assessed by action in the appropriate United States district court. In such action the validity and appropriateness of the final order imposing the penalty shall not be subject to review. (vi) The Comptroller of the Curren cy, the Board and the Federal Deposit Insurance Corporation shall promul gate regulations establishing proce dures necessary to implement this section. (vii) All penalties collected under au thority of this section shall be covered into the Treasury of the United States. (viii) All penalties collected under au thority of this section shall be covered into the Treasury of the United States. (G )(i) Each executive officer and each stockholder of record who directly or indirectly owns, controls, or has the power to vote more than 10 per cen tum of any class of voting securities of an insured bank shall make a written 17 Regulation O Statutory Provisions report to the board of directors of such bank for any year during which such executive officer or shareholder has outstanding an extension of credit from a bank which maintain a corre sponding account in the name of such bank. Such report shall include the fol lowing information: (7) the maximum amount of in debtedness to the bank maintaining the correspondent account during such year of (a) such executive offi cer or stockholder of record, (b) each company controlled by such executive officer or stockholder, or (c) each political campaign commit tee the funds or services of which will benefit such executive officer or stockholder, or which is controlled by such executive officer or stockholder; (2) the amount of indebtedness to the bank maintaining the correspon dent account outstanding as of a date not more than ten days prior to the date of filing of such report of (a) such executive officer or stock holder of record, (b) each company controlled by such executive officer or stockholder, or (c) each political campaign committee the funds or services of which will benefit such executive officer or stockholder; (5) the range of interest rates charged on such indebtedness of such executive officer or stockholder of record; and (4) the terms and conditions of such indebtedness of such executive officer or stockholder of record. (ii) The appropriate Federal banking agencies are authorized to issue rules and regulations, including definitions of terms, to require the reporting and public disclosure of information by any bank or executive officer or principal shareholder thereof concerning any ex tension of credit by a correspondent bank to the reporting bank’s executive officers or principal shareholders, or the related interests of such persons. (H ) For the purpose of this para graph— (i) the term “bank” includes a mutual savings bank; (ii) the term “related interests of such persons” includes any company con trolled by such executive officer, direc tor, or person, or any political or cam paign committee the funds or services of which will benefit such executive of ficer, director, or person or which is controlled by such executive officer, di rector, or person; and (iii) the terms “control of a compa ny” and “company” have the same meaning as under section 22 (h) of the Federal Reserve Act (12 U.S.C. 375b). [12 USC 1972. As amended by acts of Nov. 10, 1978 (92 Stat. 3690) and Oct. 15, 1982 (96 Stat. 1520, 1523, 1526).] FEDERAL DEPOSIT INSURANCE ACT OF SEPTEMBER 21, 1950 SECTION 7—Change in Control of Banks * * * * * (k) The appropriate Federal banking agen cies are authorized to issue rules and regula tions, including definitions of terms, to require the reporting and public disclosure of infor mation by a bank or any executive officer or principal shareholder thereof concerning ex tensions of credit by the bank to any of its executive officers or principal shareholders, or the related interests of such persons. [12 USC 1817(k ). As amended by acts of July 14, 1960 (74 Stat. 547); Sept. 12, 1964 (78 Stat. 940); Oct. 16, 1966 (80 Stat. 1046); Dec. 31, 1970 (84 Stat. 1811); Nov. 10, 1978 (92 Stat. 3683); and Oct. 15, 1982 (96 Stat. 1527).]
