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Pfc(fa 'forte August 18, 1992 To All Depository Institutions in the Second Federal Reserve District, and Others Maintaining Sets of Board Regulations: Enclosed is a copy of a revised Regulation 0 pamphlet, "Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks," as amended effective May 18, 1992, of the Board of Governors of the Federal Reserve System. The revised pamphlet supersedes the previous printing of this regulation and any subsequent amendments thereto. Circulars Division FEDERAL RESERVE BANK OF NEW YORK 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 May 18, 1992 Any inquiry relating to this regulation should be addressed to the Federal Reserve Bank of the Federal Reserve District in which the inquiry arises. July 1992 f i f - loz>6>2> Contents Page Page Section 215.12—Reporting requirement for credit secured by certain bank stock.................................................. Section 215.13—Civil Penalties............. Subpart A—Loans by Member Banks to Their Executive Officers, Directors, and Principal Shareholders Section 215.1—Authority, purpose, and scope............................................... . (a) Authority................................... (b) Purpose and scope.................... Section 215.2—Definitions.................... Section 215.3—Extension of credit....... Section 215.4—General prohibitions---(a ) Terms and creditworthiness....... (b) Prior approval........................... (c) Lending limit............................. (d ) Aggregate lending lim it............. (e) Overdrafts................................. Section 215.5—Additional restrictions on loans to executive officers of member banks................................................ Section 215.6—Prohibition on knowingly receiving unauthorized extension of credit.................................... Section 215.7—Extension of credit outstanding on March 10, 1979 ......... Section 215.8—Records of member banks................................................ Section 215.9—Reports by executive officers.............................................. Section 215.10—Report on credit to executive officers............................... Section 215.11—Disclosure of credit from member banks to executive officers and principal shareholders . . . (a ) Definitions................................. (b) Public disclosure........................ (c) Maintaining records.................. 1 1 1 1 3 4 4 4 5 5 5 6 6 6 7 7 8 8 Subpart B—Reports on Indebtedness of Executive Officers and Principal Shareholders to Correspondent Banks Section 215.20—Authority, purpose, and scope................................................. (a) Authority................................... (b) Purpose and scope .................... Section 215.21—Definitions.................. Section 215.22—Report by executive officers and principal shareholders . .. (a) Annual report............................ (b) Contents of report...................... (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 .. . (a) Public disclosure........................ (b) Maintaining records.................. 8 8 8 8 9 9 9 9 9 10 10 10 10 STATUTORY PROVISIONS 7 Revised Statutes section 5200................... Federal Reserve Act section 22(g) and 7 7 7 8 Bank Holding Company Act Amendments of 1970 section 106 . . . . 15 Federal Deposit Insurance Act of 1950 section 7 .............................................. 18 0 0 ................................................... 11 12 i Regulation O Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks 0' 7 3 12 C FR 215; as amended effective May 18, 1992 SUBPART A—LOANS BY MEMBER BANKS TO THEIR EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL SHAREHOLDERS (1) a depository institution (as defined in 12 USC 1813) or (2) a corporation the majority of the shares of which are owned by the United States or by any state. SECTION 215.1—Authority, Purpose, and Scope (b)(1) Control of a company or bank means that a person directly or indirectly, or act ing 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 (a) Authority. This subpart is issued pursuant to sections 11 (i), 22(g), and 22(h) of the Federal Reserve Act (12 USC 248 (i), 375a, and 375b), 12 USC 1817(k)(3), and section 306 of the Federal Deposit Insurance Corpo ration Improvement Act of 1991 (Pub. L. No. 102-242, 105 Stat. 2236 (1991). (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 not include— § 2 1 5 .2 agency’s judgment, demonstrate an absence of control. (c) Director of a member bank includes— (1 ) any director of a member bank, wheth er or not receiving compensation, (2 ) any director of a company of which the member bank is a subsidiary, and (3 ) any director of any other subsidiary of that company. An advisory director is not considered a director if the advisory director— (i) is not elected by the shareholders of the company or bank, (ii) is not authorized to vote on matters before the board of directors, and (iii) provides solely general policy advice to the board of directors. R egulation O that company, unless the executive officer of the subsidiary is excluded (by name or by title) from participation in major policy making functions of the member bank by resolutions of the boards of directors of both the subsidiary and the member bank and does not actually participate in such major policymaking functions. (e) Foreign bank has the meaning given in 12 USC 3101(7). (f) Insider means an executive officer, direc tor, or principal shareholder, and includes any related interest of such a person. (g) Immediate family means the spouse of an individual, the individual’s minor children, and any of the individual’s children (includ (d ) (1) Executive officer of a company or ing adults) residing in the individual’s home. bank means a person who participates or (h) The lending limit for a member bank is has authority to participate (other than in an amount equal to the limit on loans to a the capacity of a director) in major policy single borrower established by section 5200 of making functions of the company or bank, the Revised Statutes,2 12 USC 84. This whether or not the officer has an official ti amount is 15 percent of the bank’s unimpaired tle, the title designates the officer an assist capital and unimpaired surplus in the case of ant, or the officer is serving without salary loans that are not fully secured, and an addi or other compensation.1 The chairman of tional 10 percent of the bank’s unimpaired the board, the president, every vice presi capital and unimpaired surplus in the case of dent, the cashier, the secretary, and the loans that are fully secured by readily market treasurer of a company or bank are consid able collateral having a market value, as de ered executive officers, unless the officer is termined by reliable and continuously avail excluded, by resolution of the board of di able price quotations, at least equal to the rectors or by the bylaws of the bank or amount of the loan. The lending limit also in company, from participation (other than in cludes any higher amounts that are permitted the capacity of a director) in major policy by section 5200 of the Revised Statutes for the making functions of the bank or company, types of obligations listed therein as excep and the officer does not actually participate tions to the limit. A member bank’s unim therein. paired capital and unimpaired surplus equals (2 ) For the purpose of sections 215.4 and the sum of— 215.7 of this part, an executive officer of a (1) the “total equity capital” of the mem member bank includes an executive officer ber bank reported on its most recent consol of a company of which the member bank is idated report of condition filed under 12 a subsidiary, and any other subsidiary of USC 1817(a)(3), (2 ) any subordinated notes and debentures 1 The term is not intended to include persons who may approved as an addition to the member have official titles and may exercise a certain measure of discretion in the performance of their duties, including dis bank’s capital struction by the appropriate cretion in the making of loans, but who do not participate federal banking agency, and 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 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. R egulation O § 2 1 5 .3 (3) any valuation reserves created by newal of any loan, a granting of a line of cred charges to the member bank’s income re it or an extending of credit in any manner ported on its most recent consolidated re whatsoever, and includes— port of condition filed under 12 USC (1) a purchase under repurchase agree 1817(a)(3). ment of securities, other assets, or obligations; (i) Member bank means any banking institu (2 ) an advance by means of an overdraft, tion that is a member of the Federal Reserve cash item, or otherwise; System, including any subsidiary of a member (3 ) issuance of a standby letter of credit bank. The term does not include any foreign (or other similar arrangement regardless of bank that maintains a branch in the United name or description) or an ineligible ac States, whether or not the branch is insured ceptance, as those terms are defined in sec (within the meaning of 12 USC 1813(s)) and tion 208.8(d) of this chapter; regardless of the operation of 12 USC (4 ) an acquisition by discount, purchase, 1813(h) and 12 USC 1828(j)(2). exchange, or otherwise of any note, draft, (j) Pay an overdraft on an account means to bill of exchange, or other evidence of in pay an amount upon the order of an ac count debtedness upon which an insider may be holder in excess of funds on deposit in the liable as maker, drawer, endorser, guaran account. tor, or surety; (5) a discount of promissory notes, bills of (k) Person means an individual or a exchange, conditional sales contracts, or company. similar paper, whether with or without re (/) Principal shareholder means a person course; but the acquisition of such paper by (other than an insured bank) that directly or a member bank from another bank, without indirectly, or acting through or in concert recourse, shall not be considered a discount with one or more persons, owns, controls, or by the member bank for the other bank; has the power to vote more than 10 percent of (6 ) an increase of an existing indebtedness, any class of voting securities of a member but not if the additional funds are advanced bank or company. Shares owned or contolled by the bank for its own protection for (i) by a member of an individual’s immedite fam accrued interest or (ii) taxes, insurance, or ily are considered to be held by the individual. other expenses incidental to the existing A principal shareholder of a member bank indebtedness; includes— (7 ) an advance of unearned salary or other (1 ) a principal shareholder of a company unearned compensation for a period in ex of which the member bank is a subsidiary, cess of 30 days; and and (8) any other similar transaction as a re (2 ) a principal shareholder of any other sult of which a person becomes obligated to subsidiary of that company. pay money (or its equivalent) to a bank, whether the obligation arises directly or in (m) Related interest of a person means— directly, or because of an endorsement on (1) a company that is controlled by that an obligation or otherwise, or by any means person, or whatsoever. (2 ) a political or campaign committee that is controlled by that person or the funds or (b) An extension of credit does not include— services of which will benefit that person. (1 ) an advance against accrued salary or other accrued compensation, or an advance (n) Subsidiary has the meaning given in 12 for the payment of authorized travel or oth USC 1841(d), but does not include a subsidi er expenses incurred or to be incurred on ary of a member bank. behalf of the bank; (2) a receipt by a bank of a check deposit SECTION 215.3—Extension of Credit ed in or delivered to the bank in the usual (a) An extension of credit is a making or re course of business unless it results in the 3 § 2 1 5 .3 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(e) of this part; (3 ) an acquisition of a note, draft, bill of exchange, or other evidence of indebtedness through (i) a merger or consolidation of 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 ac counts or (ii) makes payments to or on behalf of participants in a bank credit card plan, check credit plan, interest-bearing over draft credit plan of the type specified in section 215.4(e) of this part, or similar open-end credit plan, provided— (A ) the indebtedness does not involve prior individual clearance or approval by the bank other than for the purpos es of determining authority to partici pate in the arrangement and compli ance 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. R egulation O 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 con 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 substantially the same terms (including interest rates and collateral) as, and following credit-underwriting proce dures that are not less stringent than, those prevailing at the time for comparable trans actions 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 unfavor able 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 (c) Non-interest-bearing deposits to the cred unimpaired capital and unimpaired surplus, it of a bank are not considered loans, ad unless— vances, or extensions of credit to the bank of (i) the extension of credit has been ap deposit; nor is the giving of immediate credit proved in advance by a majority of the to a bank upon uncollected items received in 4 R egulation O entire board of directors of that bank, and (ii) the interested party has abstained from participating directly or indirectly in the voting. (2) In no event may a member bank ex tend credit to any one of its executive offi cers, directors, or principal shareholders, or to any related interest of that person, in an amount that, when aggregated with all oth er extensions of credit to that person, and all related interests of that person, exceeds $500,000, except by complying with the re quirements of this paragraph. (3 ) 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. (4 ) 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) Lending limit. No member bank may ex tend credit to any of its executive officers, di rectors, or principal shareholders or to any re lated interest of that person in an amount that, when aggregated with the amount of all other extensions of credit by the member bank to that person and to all related interests of that person, exceeds the lending limit of the member bank specified in secton 215.2(h) of this part. This prohibition does not apply to an extension of credit by a member bank to a company of which the member bank is a subsidi ary or to any other subsidiary of that company. (d) Aggregate lending limit. (1) General lim it. A member bank may not extend credit to any insider unless the extension of credit is in an amount that, when aggregated with the amount of all outstanding extensions of credit by that bank to all of its insiders, does not exceed the bank’s unimpaired capital and unim § 2 1 5 .4 paired surplus (as defined in section 215.2(h) of this part). (2) M ember banks with deposits o f less than $ 1 00,0 00,00 0. A member bank with deposits of less than $100,000,000 may by resolution of its board of directors increase the general limit specified in paragraph (d )(1 ) of this section for the one-year peri od ending May 18, 1993, to a level not to exceed two times the bank’s unimpaired capital and unimpaired surplus, if— (i) the board of directors determines that such higher limit is consistent with prudent, safe, and sound banking prac tices in light of the bank’s experience in lending to its insiders and is necessary to attract or retain directors or to prevent restricting the availability of credit in small communities; (ii) the resolution sets forth the facts and reasoning on which the board of di rectors bases the finding, including the amount of the bank’s lending to its insid ers as a percentage of the bank’s unim paired capital and unimpaired surplus as of the date of the resolution; (iii) the bank has submitted the resolu tion to the appropriate federal banking agency (as defined in 12 USC 1813(q)) with a copy to the Board of Governors; and (iv) the bank meets or exceeds, on a ful ly phased-in basis, all applicable capital requirements established by the appropri ate federal banking agency. (e) Overdrafts. No member bank may pay an overdraft of an executive officer or director of the bank3 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 inadvertent overdrafts on an account in an ag 3 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. 5 § 2 1 5 .4 R egulation O gregate amount of $1,000 or less, provided time the higher of 2.5 percent of the bank’s (1) the account is not overdrawn for more capital and unimpaired surplus or $25,000, but in no event more than $100,000. than five business days, and (2 ) the member bank charges the executive officer or director (d) Any extension of credit by a member the same fee charged any other customer of bank to any of its executive officers shall be— the bank in similar circumstances. (1) promptly reported to the member bank’s board of directors; (2) in compliance with the requirements of SECTION 215.5—Additional section 215.4(a) of this part; Restrictions on Loans to Executive (3 ) preceded by the submission of a de Officers of Member Banks tailed current financial statement of the ex ecutive officer; and (a) No member bank may extend credit to (4) made subject to the condition in writ any of its executive officers,4*and no executive ing that the extension of credit will, at the officer of a member bank shall borrow from or option of the member bank, become due otherwise become indebted to the bank, ex and payable at any time that the officer is cept in the amounts, for the purposes, and indebted to any other bank or banks in an upon the conditions specified in paragraphs aggregate amount greater than the amount (c) and (d) of this section. specified for a category of credit in para (b) No member bank may extend credit in an graph (c) of this section. aggregate amount greater than the amount permitted in paragraph (c )(3 ) of this section to a partnership in which one or more of the SECTION 215.6—Prohibition on bank’s executive officers are partners and, ei Knowingly Receiving Unauthorized ther individually or together, hold a majority Extension of Credit interest. For the purposes of paragraph (c ) (3) below, the total amount of credit ex No executive officer, director, or principal tended by a member bank to such partnership shareholder of a member bank shall knowing is considered to be extended to each executive ly receive (or knowingly permit any of that officer of the member bank who is a member person’s related interests to receive) from a member bank, directly or indirectly, any ex of the partnership. tension of credit not authorized under this (c) A member bank is authorized to extend part. credit to any executive officer of the bank— (1) in any amount to finance the education SECTION 215.7—Extensions of Credit of the executive officer’s children; (2 ) in any amount to finance the purchase, Outstanding on March 10, 1979 construction, maintenance, or improvement (a) Any extension of credit that was out of a residence of the executive officer, if the standing on March 10, 1979, and that would, extension of credit is secured by a first lien if made on or after March 10, 1979, violate on the residence and the residence is owned section 215.4(c) above, shall be reduced in (or expected to be owned after the exten amount by March 10, 1980, to be in compli sion of credit) by the executive officer; and ance with the lending limit in section (3) for any other purpose not specified in 215.4(c). Any renewal or extension of such section 215.5(c)(1) and (2), if the aggre an extension of credit on or after March 10, gate amount of loans to that officer under 1979, shall be made only on terms that will this paragraph does not exceed at any one bring the extension of credit into compliance with the lending limit of section 215.4(c) by 4 Sections 215.5, 215.9, and 215.10 of this part imple March 10, 1980. However, any extension of ment section 22(g) of the Federal Reserve Act. For the purposes of those sections, an executive officer of a member credit made before March 10, 1979, that bears bank does not include an executive officer of a bank holding a specific maturity date of March 10, 1980, or company of which the member bank is a subsidiary or any later, shall be repaid in accordance with its other subsidiary of that bank holding company. 6 R egulation O 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 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. 3 and the purposes for which the proceeds have been or are to be used. SECTION 215.10— 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 1817(a) (3) a report of all extensions of credit made by the member bank to its executive officers6 since the date of the bank’s previous report of condition. SECTION 215.11—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 SECTION 215.8—Records of Member bank” means any person7 (other than an Banks insured bank, or a foreign bank as defined Each member bank shall maintain records in 12 USC 3101(7)) that, directly or indi necessary for compliance with the require rectly, owns, controls, or has power to vote ments of this part. These records shall (a) more than 10 percent of any class of voting identify all executive officers, directors, and securities of the member bank. The term in principal shareholders of the member bank cludes a person that controls a principal and the related interests of these persons and shareholder (e.g., a person that controls a (b) specify the amount and terms of each ex bank holding company). Shares of a bank tension of credit by the member bank to these (including a foreign bank), bank holding persons and to their related interests. Each company, or other company owned or con member bank shall request at least annually trolled by a member of an individual’s im that each executive officer, director, or princi mediate family are presumed to be owned pal shareholder of the member bank identify or controlled by the individual for the pur the related interests of that person. poses of determining principal shareholder status. (2) “Related interest” means (A ) any SECTION 215.9—Reports by Executive company controlled by a person or (B) any Officers political or campaign committee the funds Each executive officer5 of a member bank who or services of which will benefit a person or becomes indebted to any other bank or banks that is controlled by a person. For the pur in an aggregate amount greater than the pose of this section and subpart B, a related amount specified for a category of credit in interest does not include a bank or a foreign section 215.5(c) above, shall, within 10 days bank (as defined in 12 USC 3101(7)). of the date the indebtedness reaches such a (b) Public disclosure, (i) Upon receipt of a level, make a written report to the board of written request from the public, a member directors of the officer’s bank. The report shall bank shall make available the names of state the lender’s name, the date and amount of each extension of credit, any security for it, 6 See note 4. 5 See note 4. 7 The term “stockholder of record” appearing in 12 USC 1972(2) (G ) is synonymous with the term “person.” 7 § 2 1 5 .1 1 each of its executive officers8 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 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. R egulation O in the conduct of the affairs of the bank, that violates any provision of this subpart (other than section 215.11) is subject to civil penal ties as specified in section 29 of the Federal Reserve Act (12 USC 504). SUBPART B—REPORTS ON INDEBTEDNESS OF EXECUTIVE OFFICERS AND PRINCIPAL SHAREHOLDERS TO CORRESPONDENT BANKS SECTION 215.20—Authority, Purpose, and Scope (a) Authority. This subpart is issued pursuant 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 (c) M aintaining records. Each member bank of the Financial Institutions Regulatory and shall maintain records of all requests for the Interest Rate Control Act of 1978 (FIRA) information described in paragraph (b) of (Pub. L. 95-630), as amended by the Gam-St this section and the disposition of such re Germain Depository Institutions Act of 1982 quests. These records may be disposed of after (Pub. L. 97-320), 12 USC 1972(2) (G ). Title two years from the date of the request. VIII prohibits (1 ) preferential lending by a bank to executive officers, directors, and princi pal shareholders ofanother bank when there is a SECTION 215.12—Reporting correspondent account relationship between the Requirement for Credit Secured by banks, and (2) the opening of a correspondent Certain Bank Stock account relationship between banks when there Each executive officer or director of a member is a preferential extension of credit by one of the bank the shares of which are not publicly banks to an executive officer, director, or princi traded shall report annually to the board of pal shareholder of the other bank. directors of the member bank the outstanding amount of any credit that was extended to the executive officer or director and that is se SECTION 215.21—Definitions cured by shares of the member bank. For the purposes of this subpart, the following definitions apply unless otherwise specified: SECTION 215.13—Civil Penalties Any member bank, or any officer, director, employee, agent, or other person participating 8 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. 8 (a) “B an k ” 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. R egulation O (b) “Company,” “control o f a company or bank,” “executive officer,” 9 “extension o f credit,” “im m ediate 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 (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. /j"/ 3 j~ § 2 1 5 .2 2 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 ten business days before the report required by this section is filed;11 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. (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 (c) Definitions. For the purposes of this sec daily balance during that year of $100,000 or tion— 0.5 percent of such member bank’s total de (1 ) “Indebtedness” means an extension of posits (as reported in its first consolidated re credit, but does not include: port of condition during that calendar year), (i) commercial paper, bonds, and deben whichever amount is smaller. tures issued in the ordinary course of business; and (e) “Principal shareholder” and “related in (ii) consumer credit (as defined in 12 terest” have the meanings provided in section 215.10 of subpart A. 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 SECTION 215.22—Report by Executive terms that are not more favorable than Officers and Principal Shareholders those offered to the general public. (a) A nnual report. If during any calendar (2) “Maximum amount of indebtedness” year an executive officer or principal share means, at the option of the reporting per holder of a member bank or a related interest son, either (i) the highest outstanding in of such a person has outstanding an extension debtedness during the calendar year for of credit from a correspondent bank of the which the report is made, or (ii) the high member bank, the executive officer or princi est end of the month indebtedness outstand pal shareholder shall, on or before January 31 ing during the calendar year for which the of the following year, make a written report to report is made. the board of directors of the member bank.10* (d) Retention o f reports at member banks. (b) Contents o f report. The report required The reports required by this section shall be by this section shall include the following retained at the member bank for a period of information: three years. The Reserve Bank or the Comp(1 ) the maximum amount of indebtedness 9 See note 8. 10 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. 11 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. 9 § 2 1 5 .2 2 trailer, 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. (e) M ember 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, 1 0 R egulation O 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) M aintaining 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 zff - / & > £ > ^ Revised Statutes (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 establishment of the United States or any corporation wholly owned directly or indi rectly by the United States shall not be sub ject 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 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 11 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 R egulation O 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) Loans to executive officers by members banks. (1) Except as authorized under this subsection, no member bank may extend credit in any manner to any of its own exec utive officers. No executive officer of any member bank may become indebted to that member bank except by means of an exten sion of credit which the bank is authorized R egulation O Statutory P rovisions extended to each officer of the bank who is to make under this subsection. Any exten a member of the partnership. sion of credit under this subsection shall be (6) Whenever an executive officer of a promptly reported to the board of directors member bank becomes indebted to any of the bank, and may be made only if— bank or banks (other than the one of which (A ) the bank would be authorized to he is an officer) on account of extensions of make it to borrowers other than its credit of any one of the three categories re officers; spectively referred to in paragraphs (2), (B) it is on terms not more favorable (3), and (4) in an aggregate amount great than those afforded other borrowers; er than the aggregate amount of credit of (C) the officer has submitted a detailed the same category that could lawfully be ex current financial statement; and tended to him by the bank, he shall make a (D ) it is on condition that it shall be written report to the board of directors of come due and payable on demand of the the bank, stating the date and amount of bank at any time when the officer is in each such extension of credit, the security debted to any other bank or banks on ac therefor, and the purposes for which the count of extensions of credit of any one proceeds have been or are to be used. of the three categories respectively re (7) This subsection does not prohibit any ferred to in paragraphs (2), (3), and (4) executive officer of a member bank from en in an aggregate amount greater than the dorsing or guaranteeing for the protection amount of credit of the same category of the bank any loan or other asset previ that could be extended to him by the ously acquired by the bank in good faith or bank of which he is an officer. from incurring any indebtedness to the bank for the purpose of protecting the bank (2) With the specific prior approval of its against loss or giving financial assistance to board of directors, a member bank may it. make a loan to any executive officer of the (8) Each day that any extension of credit bank if, at the time the loan is made— in violation of this subsection exists is a (A ) it is secured by a first lien on a dwell continuation of the violation for the purpos ing which is expected, after the making of es of section 8 of the Federal Deposit Insur the loan, to be owned by the officer and ance Act. used by him as his residence, and (9) Each member bank shall include with (B) no other loan by the bank to the of (but not as part of) each report of condi ficer under authority of this paragraph is tion and copy thereof filed under section outstanding. 7 (a )(3 ) of the Federal Deposit Insurance (3) A member bank may make extensions Act a report of all loans under authority of of credit to any executive officer of the this subsection made by the bank since its bank, to finance the education of the chil previous report of condition. dren of the officer. (10) The Board of Governors of the Fed (4) A member bank may make extensions eral Reserve System may prescribe such of credit not otherwise specifically autho rules and regulations, including definitions rized under this subsection to any executive of terms as it deems necessary to effectuate officer of the bank, in an amount prescribed the purposes and to prevent evasions of this in a regulation of the member bank’s appro subsection. priate Federal banking agency. [12 USC 375a. act of June 16, 1933 (48 (5) Except to the extent permitted under 182); amended As added byResolution approved JuneStat. by Public 14, paragraph (4), a member bank may not ex 1935 (49 Stat. 375); and by acts of Aug. 23, 1935 (49 Stat. tend credit to a partnership in which one or 716); April 25, 1938 (52 Stat. 223); June 20, 1939 (53 Stat. 842); July 3, more of its executive officers are partners Stat. 3665).] 1967 (81 Stat. 109) and Nov. 10, 1978 (92 having either individually or together a ma jority interest. For the purposes of para (h ) Extensions o f credit to executive officers, graph (4), the full amount of any credit so directors, and principal shareholders o f mem extended shall be considered to have been ber banks. (1) No member bank may extend 13 Statutory Provisions credit to any of its executive officers, direc tors, or principal shareholders, or to any re lated interest of such a person, except to the extent permitted under paragraphs (2), (3), (4), and (6). (2 ) A member bank may extend credit to its executive officers, directors, or principal shareholders, or to any related interest of such a person, only if the extension of cred it— (A ) is made on substantially the same terms, including interest rates and collat eral, as those prevailing at the time for comparable transactions by the bank with persons who are not executive offi cers, directors, principal shareholders, or employees of the bank; and (3 ) A member bank may extend credit to a person, described in paragraph (1 ) in an amount that, when aggregated with the amount of all other outstanding extensions of credit by that bank to each such person and that person’s related interests, would exceed an amount prescribed by regulation of the appropriate Federal banking agency (as defined in section 3 of the Federal De posit Insurance Act) only if— (A ) the extension of credit has been ap proved in advance by a majority vote of that bank’s entire board of directors; and (B) the interested party has abstained from participating, directly or indirectly, in the deliberations or voting on the ex tension of credit. (4 ) A member bank may extend credit to any executive officer, director, or principal shareholder, or to any related interest of such a person, only if the extension of credit is in an amount that, when aggregated with the amount of all outstanding extensions of credit by that bank to that person and that person’s related interests, would not exceed the limits on loans to a single borrower es tablished by section 5200 of the Revised Statutes. For purposes of this paragraph, section 5200 of the Revised Statutes shall be deemed to apply to a State member bank as if the State member bank were a national banking association. (5 ) (A ) A member bank may extend credit to any executive officer, director, or prin cipal shareholder, or to any related inter 14 R egulation O est of such a person, if the extension of credit is in an amount that, when aggre gated with the amount of all outstanding extensions of credit by that bank to its executive officers, directors, principal shareholders, and those persons’ related interests would not exceed the bank’s un impaired capital and unimpaired surplus. (B) The Board may, by regulation, pre scribe a limit that is more stringent than that contained in subparagraph (A). (C) The Board may, by regulation, make exceptions to subparagraph (A) for member banks with less than $100,000,000 in deposits if the Board determines that the exceptions are impor tant to avoid constricting the availability of credit in small communities or to at tract directors to such banks. In no case may the aggregate amount of all out standing extensions of credit to a bank’s executive officers, directors, principal shareholders, and those persons’ related interests be more than 2 times the bank’s unimpaired capital and unimpaired surplus. (6 ) (A ) If any executive officer or director has an account at the member bank, the bank may not pay on behalf of that per son an amount exceeding the funds on deposit in the account. (B) Subparagraph (A ) does not prohib it a member bank from paying funds in accordance with— (i) a written preauthorized, interestbearing extension of credit specifying a method of repayment; and (ii) a written preauthorized transfer of funds from another account of the executive officer or director at that bank. (7 ) No executive officer, director, or prin cipal shareholder shall knowingly receive (or knowingly permit any of that person’s related interests to receive) from a member bank, directly or indirectly, any extension of credit not authorized under this subsection. (8) For purposes of this subsection, any executive officer, director, or principal shareholder (as the case may be) of any company of which the member bank is a R egulation O /# - / S 3 c£> subsidiary, or of any other subsidiary of that company, shall be deemed to be an ex ecutive officer, director, or principal share holder (as the case may be) of the member bank. (9) For purposes of this subsection: (A ) (i) Except as provided in clause (ii), the term “company” means any corporation, partnership, business or other trust, association, joint venture, pool syndicate, sole proprietorship, un incorporated organization, or other business entity. (ii) The term “company” does not in clude— (I) an insured depository institu tion (as defined in section 3 of the Federal Deposit Insurance Act); or (II) a corporation the majority of the shares of which are owned by the United States or by any State. (B) A person controls a company or bank if that person, directly or indirectly, or acting through or in concert with 1 or more persons— (i) owns, controls, or has the power to vote 25 percent or more of any class of the company’s voting securities; (ii) controls in any manner the elec tion of a majority of the company’s di rectors; or (iii) has the power to exercise a con trolling influence over the company’s management or policies. (C ) A person is an “executive officer” of a company or bank if that person partici pates or has authority to participate (other than as a director) in major poli cymaking functions of the company or bank. (D ) A member bank extends credit by making or renewing any loan, granting a line of credit, or entering into any similar transaction as a result of which a person becomes obligated (directly or indirectly, or by any means whatsoever) to pay money or its equivalent to the bank. (E) The term “member bank ” includes any subsidiary of a member bank. (F ) The term “principal shareholder” means any person that directly or indi rectly, or acting through or in concert Statutory Provisions with one or more persons, owns, con trols, or has the power to vote more than 10 percent of any class of voting securi ties of a member bank or company. (G ) A “related interest" of a person is— (i) any company controlled by that person; and (ii) any political or campaign com mittee that is controlled by that person or the funds or services of which will benefit that person. (H ) The term “subsidiary ” has the same meaning as in section 2 of the Bank Holding Company Act of 1956. (10) The Board of Governors of the Fed eral Reserve System may prescribed such regulations, including definitions of terms, as it determines to be necessary to effectuate the purposes and prevent evasions of this subsection. [12 USC 375b. As added by act of Nov. 10, 1978 (92 Stat. 3644) and amended by acts of Oct. 15, 1982 (96 Stat. 1520, 1522) and Dec. 19, 1991 (105 Stat. 2355).] 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 ad15 Statutory Provisions 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 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 16 R egulation O 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 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 R egulation O fo' I S 3 P& 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 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 Statutory P rovisions 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 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 au17 Statutory Provisions 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 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: (1) 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 18 R egulation O 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 SECTION 7—Change in Control of Banks * * * * * (k) A nnual report to Federal banking agency. The appropriate Federal banking agencies are authorized to issue rules and regulations, in cluding definitions of terms, to require the re porting and public disclosure of information by a bank or any executive officer or principal shareholder thereof concerning extensions of credit by the bank to any of its executive offi cers or principal shareholders, or the related interests of such persons. [12 USC 1817(k). As added by act of Nov. 10, 1978 (92 Stat. 3683) and amended by act of Oct. 15, 1982 (96 Stat. 1527).] C
@FedFRASER