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FED ERA L R E SE R V E BANK O F DALLAS
S tation K, Dallas, T e x a s 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
11 Persons reporting under this section are not required
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’s responsibility. Each mem­
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
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(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
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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

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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

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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
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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
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(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).]