Board Essentials Module 4: Reg O for Directors
Reg O for Directors
Regulation O imposes many restrictions on loans made to a bank’s directors and their related interests. Since preferential treatment of directors is prohibited, a loan to a director (or the director’s related interests) must be based on the same terms and underwriting criteria as loans to other customers. Moreover, a loan to a director must satisfy even higher standards. These loans must be specifically approved in advance by a majority of the entire board, and the interested director must abstain. In addition, the aggregate amount of loans to a director/related interests is strictly limited. Regulators are quick to impose large civil monetary penalties for any Reg O violation, so it’s imperative that all directors understand its requirements and limitations.
Spencer Fane LLP
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