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The US regulation governing specified credit to bank insiders and their related interests.
The framework covers defined executive officers, directors and principal shareholders, with detailed rules for related interests and particular extensions of credit. Restrictions include lending limits, approval requirements and conditions intended to avoid preferential treatment. Although its wording refers to member banks, other US banking laws extend relevant requirements to additional institutions. Coverage must be checked against the actual institution and transaction.
Imagine a covered bank considering a substantial loan to a company controlled by one of its directors. A compliance review would establish whether the company is a related interest, which limits apply, whether the required board approval has been obtained, and whether terms compare appropriately with similar non-insider loans. Calling the company independent in a press release would not settle those legal questions.
Fed extends deadline for comments on insider-lending proposal