The Federal Reserve Board said on October 2 that it will extend the comment period on its Regulation O proposal until November 4. Comments had been due October 5. The Board said the extra time lets interested parties analyze the issues and prepare comments.
What the proposal covers
Regulation O governs credit that a bank extends to its insiders: executives, board members and major shareholders who could influence its lending decisions. In its July 31 announcement, the Board said the rule has not been comprehensively updated since 1979. The proposal updates dollar-based thresholds and indexes them to economic growth going forward. It also addresses unnecessary applications of the rule to passive interests in companies held by investment funds, and it codifies statutory requirements and long-standing interpretations.
Vice Chair Michelle W. Bowman said in the release: “Community banks often face challenges recruiting experienced business leaders to serve as members of bank boards and as bank executives.”
Why it matters
The extension is procedural, but it changes the calendar for compliance teams. A bank that lends to executives or directors now has until November 4 to model how updated thresholds and the investment-fund change would affect its insider-credit tracking.
The extension follows a run of Fed bank-supervision releases we have covered, including the resolution plan feedback letters for 15 banking organizations and the final stress test changes behind our opinion on stress test severity.
Our read
The passive-interest change deserves a closer look from banks with fund-backed fintech partners, because a definition change can alter which relationships fall under the rule. The release does not say how many banks that affects, so comments from banks are the place to supply that.
Source: Federal Reserve Board
