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FEDERAL RESERVE BANK OF NEW YORK r 9396 ~| Circular No. November 8, 1982 J AMENDMENTS TO REGULATION O Conforming the Regulation to the Depository Institutions Act of 1982 T o A ll M e m b e r B a n k s, a n d O th e r s C o n c e r n e d , in th e S e c o n d F e d e r a l R e s e r v e D is tr ic t: The following statement has been issued by the Board of Governors of the Federal Reserve System: The Federal Reserve Board has announced amendments to its Regulation O — which deals with loans by member banks to its executive officers, directors and principal shareholders — to conform to provisions of the recently enacted Gam-St Germain Depository Institutions Act of 1982. The amended regulation, in conformity to the new statute: — Removes the dollar limit on the amount a member bank may lend to its executive officers for the education of their children and for home purchase, construction or improvement; and — Reaffirms on a temporary basis: — The limit of $10,000 that may be outstanding at any one time for loans by a member bank to executive officers for other purposes, and — The requirement for advance approval by a majority of the board of directors of the bank for loans amounting to $25,000 or more in the aggregate made to the bank’s executive officers, directors or principal shareholders and their related interests. Enclosed is a copy of the text of the amendments, effective November 1, 1982. Questions thereon may be directed to our Consumer Affairs and Bank Regulations Department (Tel. No. 212-791-5914). A nth o n y M. So l o m o n , President. Board of Governors of the Federal Reserve System LOANS TO EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL SHAREHOLDERS OF MEMBER BANKS AMENDMENTS TO REGULATION O ( e f f e c t iv e N o v e m b e r 1 , 1 9 8 2 ) FEDERAL RESERVE SYSTEM 12CFR Part 215 [Docket No. R-0428] Regulation O; Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks B o a r d o f G o v e r n o r s o f th e F e d e r a l R e s e r v e S y s te m . A CTION: F in a l ru le w ith c la r ific a tio n . AGENCY: T h e B o a rd o f G o v e r n o r s o f th e F e d e r a l R e s e r v e S y s te m is a m e n d in g its R e g u la tio n O (12 C FR P art 215), w h ic h g o v e r n s lo a n s b y a m e m b e r b a n k to its e x e c u tiv e o ffic e r s, d ir e c to r s a n d p rin c ip a l sh a r e h o ld e r s , to im p le m e n t c e r ta in a m e n d m e n ts to s e c t io n s 22 (g) a n d (h) o f th e F e d e r a l R e s e r v e A c t (12 U .S .C . 375a a n d 375b ), in c lu d e d in th e G a rn -S t G er m a in D e p o sito r y In stitu tio n s A c t o f 1982. T h e a m e n d m e n ts to th e R e g u la tio n r e la te to th e lim ita tio n s o n lo a n s b y a m e m b e r b a n k to its e x e c u tiv e o ffic e r s. In a d d itio n , th e ru le c o n fir m s th e d o lla r a m o u n t a b o v e w h ic h th e p rior a p p r o v a l o f th e b a n k ’s b o a r d o f d ir e c to r s is re q u ire d for lo a n s b y a m e m b e r b a n k to its e x e c u tiv e o ffic e r s, d ir e c to r s, a n d p r in c ip a l sh a r e h o ld e r s a n d th e ir r e la te d in te r e sts. EFFECTIVE DATE: N o v e m b e r 1 ,1 9 8 2 . SUM M ARY: FOR FURTHER IN FO RM A TIO N CONTACT: J am es V . M a ttin g ly , Jr., A s s o c ia te G e n e r a l C o u n s e l (2 0 2 /4 5 2 -3 4 3 0 ), or J en n ifer J. J o h n so n , S e n io r A tto r n e y (2 0 2 /4 5 2 -3 5 8 4 ), B oa rd o f G o v e r n o r s o f th e F e d e r a l R e s e r v e S y ste m . SUPPLEMENTARY INFO RM ATION: P rior to e n a c tm e n t o f th e G a rn -S t G er m a in D e p o sito r y In stitu tio n s A c t o f 1982 (“D IA " ), s e c tio n 22(g) o f th e F e d e r a l R e s e r v e A c t p r e sc r ib e d c e r ta in d o lla r lim ita tio n s o n lo a n s b y a m e m b e r b a n k to its e x e c u tiv e o ffic e r s. T h e s e lim its w e r e $ 60,000 for a h o m e m o rtg a g e , $ 20,000 for th e e d u c a tio n o f th e e x e c u tiv e o ffic e r ’s c h ild re n , a n d $ 10,000 fo r a ll o th e r p u r p o se s. S e c tio n 4 2 1 (a ) o f th e D IA e lim in a te d th e d o lla r lim ita tio n s o n h o m e m o rtg a g e a n d e d u c a tio n lo a n s . A c c o r d in g ly , th e a tta c h e d ru le a m e n d s R e g u la tio n O to e lim in a te th e $ 60,000 a n d $ 20,000 lim its for su c h lo a n s th a t are cu r re n tly s p e c ifie d in th e r e g u la tio n . S e c tio n 421(b ) o f th e D IA e lim in a te d th e $ 10,000 lim ita tio n o n “o th e r ” lo a n s a n d s u b s titu te d th e refo r “ a n a m o u n t p r e sc r ib e d in a r e g u la tio n o f th e m em b e r b a n k ’s a p p r o p ria te F e d e r a l b a n k in g a g e n c y .” T h e a tta c h e d ru le s p e c ifie s th a t, u n til th e B oa rd a d o p ts a n e w le n d in g lim it for lo a n s b y a S ta te m e m b e r b a n k to its e x e c u tiv e o ffic e r s u n d e r s e c tio n 22(g) o f th e F e d e r a l R e s e r v e A ct, th e $10 ,0 00 lim it cu r re n tly fo u n d in s e c tio n 2 15 .5 (c)(3 ) o f R e g u la tio n O c o n tin u e s to b e th e lim it for su c h lo a n s b y a S ta te m em b e r b a n k to a n y o f its e x e c u tiv e o ffic e r s. S ection 22(h)(2) o f the F ed era l R e serv e A c t p r o v id e s that n o m em b er b a n k shall m a k e a n y loa n to a n y e x e c u tiv e o ffice r , d ire cto r or p rin cip a l s h a re h o ld e r o f the bank, or to a n y rela ted in terest o f su ch a p erson , in an a m ou n t that, w h e n a ggreg ated w ith all oth er lo a n s or e x te n s io n s o f cred it o f the b a n k to that p erson a nd p e r s o n ’ s rela ted in terests, e x c e e d s $25 ,0 00 u n le s s su c h lo a n o r e x te n s io n o f c r e d it is a p p r o v e d in a d v a n c e b y a m a jo r ity o f th e b a n k ’s e n tir e b o a r d o f d ir e c to r s w ith th e in te r e s te d p a r ty a b s ta in in g from th e v o te . S e c tio n 4 2 2 o f th e D IA e lim in a te s th e $25 ,0 00 a m o u n t in s e c tio n 2 2 (h )(2 ) a n d s u b s titu te s th e r e fo r “a n a m o u n t p r e sc r ib e d in a r e g u la tio n o f th e a p p r o p r ia te F e d e r a l b a n k in g a g e n c y .” A c c o r d in g ly , u n til th e B o a r d a d o p ts a n e w d o lla r a m o u n t a b o v e w h ic h th e p rior b o a r d o f d ir e c to r ’s a p p r o v a l fo r lo a n s to e x e c u tiv e o ffic e r s, d ir e c to r s a n d p r in c ip a l s h a r e h o ld e r s a n d th e ir r e la te d in te r e sts is r e q u ir e d u n d e r s e c tio n 22(h )(2 ) o f th e F e d e r a l R e s e r v e A c t, th e cu rren t $ 25 ,0 00 a m o u n t s p e c ifie d in s e c tio n 215 .4 (b ) o f R e g u la tio n O c o n tin u e s in e ffe c t. P u r su a n t to s e c tio n 0 05 (b ) o f th e R e g u la to r y F le x ib ility A c t (P u b . L. 9 6 354; 5 U .S .C . 601 et seq ), th e B o a rd o f G o v e r n o r s o f th e F e d e r a l R e s e r v e S y s te m c e r tifie s th a t th e a m e n d m e n t w ill n o t h a v e a s ig n ific a n t e c o n o m ic im p a c t o n a s u b s ta n tia l n u m b e r o f sm a ll e n titie s th a t w o u ld b e s u b je c t to th e r e g u la tio n . T h e a m e n d m e n t w o u ld lib e r a liz e e x is tin g r e g u la tio n s a n d w o u ld n o t h a v e a n y p a r tic u la r e ffe c t o n sm a ll e n titie s th a t w o u ld b e s u b je c t th e r e to . T h e p r o v is io n s o f s e c tio n 5 53 (b ) o f T itle 5, U n ite d S ta te s C o d e , w ith r e s p e c t to n o tic e , p u b lic p a r tic ip a tio n a n d d e fe r r e d e ffe c tiv e d a te , h a v e n o t b e e n fo llo w e d b e c a u s e th e s e a m e n d m e n ts im p le m e n t sta tu to r y c h a n g e s . M o r e o v e r , b e c a u s e o f th e la c k o f a d e fe r r e d e ffe c tiv e d a te in s e c t io n s 421 a n d 4 2 2 o f th e D IA , it is n e c e s s a r y for th e B o a r d to For this Regulation to be complete, retain: 1) Regulation O pamphlet, amended effective December 31, 1979. 2) This slip sheet. PRINTED IN NEW YORK. FROM FEDERAL REGISTER, VOL. 47, NO. 211 [Enc. Cir. No. 9396] (over ) a c t im m e d ia te ly to re a ffirm th e c o n tin u e d e f fe c tiv e n e s s o f th e $10 ,0 00 le n d in g lim it fo r S ta te m e m b e r b a h k lo a n s to th e ir e x e c u tiv e o ffic e r s a n d th e $ 2 5 ,0 0 0 p rior b o a r d o f d ir e c to r s ’ a p p r o v a l r e q u ir e m e n t cu r re n tly s p e c ifie d in th e B o a r d ’s R e g u la tio n O . W ith o u t su c h a c tio n b y th e B oa rd , e v e r y e x te n s io n o f cre4d it b y a S ta te m e m b e r b a n k to a n e x e c u tiv e o ffic e r , d ir e c to r or p r in c ip a l s h a r e h o ld e r w o u ld re q u ire th e p rior a p p r o v a l o f th e b o a r d o f d ir e c to r s o f th e b a n k a n d n o S ta te m e m b e r b a n k c o u ld e x te n d a n y c r e d it to its e x e c u tiv e o ffic e r s for o th e r th a n e d u c a tio n or h o m e m o r tg a g e p u r p o se s. L ist o f S u b je c ts in 12 C F R P art 215 B a n k s, b a n k in g , C red it, R ep o rtin g a n d r e c o r d k e e p in g r e q u ir e m e n ts, F e d e r a l R e s e r v e S y ste m . PART 215— [AMENDED] A c c o r d in g ly , p u rsu a n t to its a u th o r ity u n d e r s e c tio n s 22(g) a n d 22(h ) o f th e F e d e r a l R e s e r v e A c t (12 U .S .C . 375a a n d 375b ), th e B oa rd o f G o v e r n o r s a m e n d s R eg u la tio n O (12 C FR P art 215) b y r e v isin g § 215 .5 (c) to r e a d a s fo llo w s : § 215.5 Additional restriction* on loans to executive officers. * * * * (c) A m e m b e r b a n k is a u th o r iz e d to e x te n d c r e d it to a n y e x e c u tiv e o ffic e r o f th e b an k : (1) In a n y a m o u n t to fin a n c e th e e d u c a tio n o f th e e x e c u tiv e o ffic e r ’s ch ild ren ; (2) In a n y a m o u n t to fin a n c e th e p u r c h a se , c o n str u c tio n , m a in te n a n c e , or im p r o v e m e n t o f a r e s id e n c e o f th e e x e c u tiv e o ffic e r , if th e e x te n s io n o f c r e d it is s e c u r e d b y a first lie n o n th e r e s id e n c e a n d th e r e s id e n c e is o w n e d (or e x p e c te d to b e o w n e d a fte r th e e x te n s io n o f c r ed it) b y th e e x e c u tiv e o fficer; a n d (3) In a n a g g r e g a te a m o u n t n o t to e x c e e d $ 1 0 ,0 00 o u tsta n d in g a t a n y o n e tim e for a p u r p o se n o t o th e r w is e s p e c ific a lly a u th o r iz e d u n d e r th is paragraph. * * * * w Board of Governors of the Federal Reserve System, October 26,1982. William W . Wiles, Secretary o f the Board. (FR Doc. 82-29925 Filed 10-29-82; 8:45 am]
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