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7500 - FRB Regulations
{{12-31-07 p.7641}}
PART 215—LOANS TO EXECUTIVE OFFICERS, DIRECTORS, AND
PRINCIPAL SHAREHOLDERS OF MEMBER BANKS (REGULATION O)
Sec.
215.1
Authority, purpose, and scope.
215.2
Definitions.
215.3
Extension of credit.
215.4
General prohibitions.
215.5
Additional restrictions on loans to executive officers of member banks.
215.6
Prohibition on knowingly receiving unauthorized extension of credit.
215.7
Extensions of credit outstanding on March 10, 1979.
215.8
Records of member banks.
215.9
Disclosure of credit from member banks to executive officers and
principal shareholders.
215.10
Reporting requirements for credit secured by certain bank stock.
215.11
Civil penalties.
Appendix A to Part
215—Section 5200 of the Revised Statutes Total Loans and Extension of
Credit
AUTHORITY: 12 U.S.C. 248(a),
375a(10),
375b(9) and (10),
1817(k) and Pub. L.
102--242, 105 Stat. 2236 (1991).
SOURCE: The provisions of this Part 215 appear at 59 Fed. Reg.
8837, February 24, 1994, except as otherwise noted.
Subpart A—Loans by Member Banks to Their Executive
Officers, Directors, and Principal
Shareholders
§ 215.1 Authority, purpose, and scope.
(a) Authority. This part is issued pursuant to sections
11(a), 22(g), and 22(h) of the Federal Reserve Act (12 U.S.C. 248(a),
375a, and 375b), 12 U.S.C. 1817(k), and section 306 of the Federal
Deposit Insurance Corporation Improvement Act of 1991 (Pub. L.
102--242, 105 Stat. 2236 (1991)).
(b) Purpose and scope--(1) This part governs any
extension of credit made by a member bank to an executive officer,
director, or principal shareholder of the member bank, of any company
of which the member bank is a subsidiary, and of any other subsidiary
of that company.
(2) This part also applies to any extension of credit made by a
member bank to a company controlled by such a person, or to a political
or campaign committee that benefits or is controlled by such a person.
(3) This part also implements the reporting requirements of 12
U.S.C. 1817(k) concerning extensions of credit by a member bank to its
executive officers of principal shareholders (or to the related
interests of such persons).
(4) Extensions of credit made to an executive officer, director,
or principal shareholder of a bank (or to a related interest of such
person) by a correspondent bank also are subject to restrictions set
forth in 12 U.S.C. 1972(2).
[Codified to 12 C.F.R. § 215.1]
[Section 215.1 amended at 44 Fed. Reg. 67978, November 28,
1979, effective December 31, 1979; 57 Fed. Reg. 22424, May 28, 1992,
effective May 18, 1992; 59 Fed. Reg. 8837, February 24, 1994, effective
February 18, 1994; 71 Fed. Reg. 71474, December 11, 2006, effective
January 1, 2007; 72 Fed. Reg. 30470, June 1, 2007, effective July 2,
2007]
{{12-31-07 p.7642}}
§ 215.2 Definitions.
For the purposes of this part, the following definitions apply
unless otherwise specified:
(a) Affiliate means any company of which a member bank
is a subsidiary or any other subsidiary of that company.
(b) Company means any corporation, partnership, trust
(business or otherwise), association, joint venture, pool syndicate,
sole proprietorship, unincorporated organization, or any other form of
business entity not specifically listed herein. However, the term does
not include:
(1) An insured depository institution (as defined in
12 U.S.C. 1813); or
(2) A corporation the majority of the shares of which are owned
by the United States or by any state.
(c)(1) Control of a company or bank means that a person
directly or indirectly, or acting 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 company or bank; or
(iii) Has the power to exercise a controlling 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 controlling influence over the management or policies, 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 voting
securities of the company or bank; and
(B) No other person owns, controls, or has the power to vote a
greater percentage 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 officer or director of the company or bank.
(4) A person may rebut a presumption established by paragraph
(c)(2) of this section by submitting to the appropriate Federal banking
agency (as defined in 12 U.S.C.
1813(q)) written materials that, in the agency's judgment,
demonstrate an absence of control.
(d) Director of a company or bank--(1) means any
director of the company or bank, whether or not receiving compensation.
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.
(2) Extensions of credit to a director of an affiliate of a bank
are not subject to §§ 215.4, 215.6, and 215.8 if--
(i) The director of the affiliate is excluded, by resolution of
the board of directors or by the bylaws of the bank, from participation
in major policymaking functions of the bank, and the director does not
actually participate in such functions;
(ii) The affiliate does not control the bank;
(iii) As determined annually, the assets of the affiliate do not
constitute more than 10 percent of the consolidated assets of the
company that--
(A) Controls the bank; and
{{6-29-07 p.7643}}
(B) Is not controlled by any other company; and
(iv) The director of the affiliate is not otherwise subject to
§§ 215.4, 215.6, and 215.8.
(3) For purposes of paragraph (d)(2)(i) of this section, a
resolution of the board of directors or a corporate bylaw may--
(i) Include the director (by name or by title) in a list of
persons excluded from participation in such functions; or
(ii) Not include the director in a list of persons authorized (by
name or by title) to participcate in such functions.
(e)(1) Executive officer of a company or bank means a
person who participates or has authority to participate (other than in
the capacity of a director) in major policymaking functions of the
company or bank, whether or not: the officer has an official title; the
title designates the officer an assistant; or the officer is serving
without salary or other compensation. 1
The chairman of the board, the president, every vice president, the
cashier, the secretary, and the treasurer of a company or bank are
considered executive officers, unless the officer is excluded, by
resolution of the board of directors or by the bylaws of the bank or
company, from participation (other than in the capacity of a director)
in major policymaking functions of the bank or company, and the officer
does not actually participate therein.
(2) Extensions of credit to an executive officer of an affiliate
of a bank are not subject to §§ 215.4, 215.6, and 215.8 if--
(i) The executive officer is excluded, by resolution of the board
of directors or by the bylaws of the bank, from participation in major
policymaking functions of the bank, and the executive officer does not
actually participate in such functions;
(ii) The affiliate does not control the bank;
(iii) As determined annually, the assets of the affiliate do not
constitute more than 10 percent of the consolidated assets of the
company that--
(A) Controls the bank; and
(B) Is not controlled by any other company; and
(iv) The executive officer of the affiliate is not otherwise
subject to §§ 215.4, 215.6, and 215.8.
(3) For purposes of paragraphs (e)(1) and (e)(2)(i) of this
section, a resolution of the board of directors or a corporate bylaw
may--
(i) Include the executive officer (by name or by title) in a list
of persons excluded from participation in such functions; or
(ii) Not include the executive officer in a list of persons
authorized (by name or by title) to participate in such functions.
(f) Foreign bank has the meaning given in
12 U.S.C. 3101(7).
(g) Immediate family means the spouse of an individual,
the individual's minor children, and any of the individual's children
(including adults) residing in the individual's home.
(h) Insider means an executive officer, director, or
principal shareholder, and includes any related interest of such a
person.
(i) Lending limit. The lending limit for a member bank
is an amount equal to the limit of loans to a single borrower
established by section 5200 of the Revised
Statutes. 2
12 U.S.C. 84. This amount is 15 percent of the bank's unimpaired
capital and unimpaired
{{6-29-07 p.7644}}surplus in the case of loans that are
not fully secured, and an additional 10 percent of the bank's
unimpaired capital and unimpaired surplus in the case of loans that are
fully secured by readily marketable collateral having a market value,
as determined by reliable and continuously available price quotations
at least equal to the amount of the loan. The lending limit also
includes any higher amounts that are permitted by section 5200 of the
Revised Statutes for the types of obligations listed therein as
exceptions to the limit. A member bank's unimpaired capital and
unimpaired surplus equals:
(1) The bank's Tier 1 and Tier 2 capital included in the bank's
risk-based capital under the capital guidelines of the appropriate
Federal banking agency, based on the bank's most recent consolidated
report of condition filed under 12
U.S.C. 1817(a)(3); and
(2) The balance of the bank's allowance for loan and lease losses
not included in the bank's Tier 2 capital for purposes of the
calculation of risk-based capital by the appropriate Federal banking
agency, based on the bank's most recent consolidated report of
condition filed under 12 U.S.C. 1817(a)(3).
(j) Member bank means any banking institution that is a
member of the Federal Reserve System, including any subsidiary of a
member bank. The term does not include any foreign bank that maintains
a branch in the United States, whether or not the branch is insured
(within the meaning of 12 U.S.C.
1813(a)) and regardless of the operation of
12 U.S.C. 1813(h) and
12 U.S.C. 1828(j)(3)(B).
(k) Pay as overdraft on an account means to pay an
amount upon the order of an account holder in excess of funds on
deposit in the account.
(l) Person means an individual or a company.
(m)(1) Principal shareholder means a person (other than
an insured bank) that 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 percent of any class of voting securities of a member
bank or company. Shares owned or controlled by a member of an
individual's immediate family are considered to be held by the
individual.
(2) A principal shareholder of a member bank does not include a
company of which a member bank is a subsidiary.
(n) Related interest of a person means:
(1) A company that is controlled by that person; or
(2) A political or campaign committee that is controlled by that
person or the funds or services of which will benefit that person.
(o) Subsidiary has the meaning given in
12 U.S.C. 1841(d), but does not
include a subsidiary of a member bank.
[Codified to 12 C.F.R. § 215.2]
[Section 215.2 amended at 44 Fed. Reg. 67979, November 28, 1979,
effective December 31, 1979; 48 Fed. Reg. 42805, September 20, 1983,
effective October 20, 1983; 57 Fed. Reg. 22424, May 28, 1992, effective
May 18, 1992; 59 Fed. Reg. 8837, February 24, 1994, effective February
18, 1994; 59 Fed. Reg. 37930, July 26, 1994 effective July 19, 1994; 60
Fed. Reg. 31054, June 13, 1995, effective July 1, 1995; 62 Fed. Reg.
13298, March 20, 1997, effective April 1, 1997; 71 Fed. Reg. 71474,
December 11, 2006, effective January 10, 2007; 72 Fed. Reg. 30470, June
1, 2007, effective July 2, 2007]
§ 215.3 Extension of credit.
(a) An extension of credit is a making or renewal of any loan, a
granting of a line of credit, or an extending of credit in any manner
whatsoever, and includes:
(1) A purchase under repurchase agreement of securities, other
assets, or obligations;
(2) An advance by means of an overdraft, cash item, or otherwise;
(3) Issuance of a standby letter of credit (or other similar
arrangement regardless of name or description) or an ineligible
acceptance, as those terms are defined in § 208.24 of this
chapter;
{{12-31-98 p.7645}}
(4) An acquisition by discount, purchase, exchange, or otherwise
of any note, draft, bill of exchange, or other evidence of indebtedness
upon which an insider may be liable as maker, drawer, endorser,
guarantor, or surety;
(5) An increase of an existing indebtedness, but not if the
additional funds are advanced by the bank for its own protection for:
(i) Accrued interest; or
(ii) Taxes, insurance, or other expenses incidental to the
existing indebtedness;
(6) An advance of unearned salary or other unearned compensation
for a period in excess of 30 days; and
(7) Any other similar transaction as a result of which a person
becomes obligated to pay money (or its equivalent) to a bank, whether
the obligation arises directly or indirectly, or because of an
endorsement on an obligation or otherwise, or by any means whatsoever.
(b) An extension of credit does not include:
(1) An advance against accrued salary or other accrued
compensation, or an advance for the payment of authorized travel or
other expenses incurred or to be incurred on behalf of the bank;
(2) A receipt by a bank of a check deposited in or delivered to
the bank in the usual course of business unless it results in the
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 § 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 proceeding for the
protection of the bank, provided 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 other 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;
(5) Indebtedness of $15,000 or less arising by reason of any
general arrangement by which a bank:
(i) Acquires charge or time credit accounts; or
(ii) Makes payments to or on behalf of participants in a bank
credit card plan, check credit plan, 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 purposes of determining
authority to participate in the arrangement and compliance 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;
(6) Indebtedness of $5,000 or less arising by reason of an
interest-bearing overdraft credit plan of the type specified in
§ 215.4(e) of this part; or
(7) A discount of promissory notes, bills of exchange,
conditional sales contracts, or similar paper, without recourse.
(c) Non-interest-bearing deposits to the credit of a bank are not
considered loans, advances, or extensions of credit to the bank of
deposit; nor is the giving of immediate credit to a bank upon
uncollected items received in the ordinary course of business
considered to be a loan, advance or extension of credit to the
depositing bank.
(d) For purposes of § 215.4 of this part, an extension of credit
by a member bank is considered to have been made at the time the bank
enters into a binding commitment to make the extension of credit.
(e) A participation without recourse is considered to be an
extension of credit by the participating bank, not by the originating
bank.
{{12-31-98 p.7646}}
(f) Tangible economic benefit rule--(1) In
general. An extension of credit is considered made to an insider
to the extent that the proceeds are transferred to the insider or are
used for the tangible economic benefit of the insider.
(2) Exception. An extension of credit is not
considered made to an insider under paragraph (f)(1) of this section
if:
(i) The credit is extended on terms that would satisfy the
standard set forth in § 215.4(a) of this part for extensions of
credit to insiders; and
(ii) The proceeds of the extension of credit are used in a bona
fide transaction to acquire property, goods, or services from the
insider.
[Codified to 12 C.F.R. § 215.3]
[Section 215.3 amended at 57 Fed. Reg. 22425, May 28, 1992,
effective May 18, 1992; 59 Fed. Reg. 8838, February 24, 1994, effective
February 18, 1994; 59 Fed. Reg. 37930, July 26, 1994, effective July
19, 1994; 63 Fed. Reg. 58621, November 2, 1998]
§ 215.4 General prohibitions.
(a) Terms and creditworthiness.--(1) In general. No
member bank may extend credit to any insider of the bank or insider of
its affiliates unless the extension of credit:
(i) Is made on substantially the same terms (including interest
rates and collateral) as, and following credit underwriting procedures
that are not less stringent than, those prevailing at the time for
comparable transactions by the bank with other persons that are not
covered by this part and who are not employed by the bank; and
(ii) Does not involve more than the normal risk of repayment or
present other unfavorable features.
(2) Exception. Nothing in this paragraph (a) or
(e)(2)(ii) of this section shall prohibit any extension of credit made
pursuant to a benefit or compensation program--
(i) That is widely available to employees of the member bank and,
in the case of extensions of credit to an insider of its affiliates, is
widely available to employees of the affiliates at which that person is
an insider; and
(ii) That does not give preference to any insider of the member
bank over other employees of the member bank and, in the case of
extensions of credit to an insider of its affiliates, does not give
preference to any insider of its affiliates over other employees of the
affiliates at which that person is an insider.
(b) Prior approval. (1) No member bank may extend
credit (which term includes granting a line of credit) to any insider
of the bank or insider of its affiliates in an amount that, when
aggregated with the amount of all other extensions of credit to that
person and to all related interests of that person, exceeds the higher
of $25,000 or 5 percent of the member bank's unimpaired capital and
unimpaired surplus, unless:
(i) The extension of credit has been approved in advance by a
majority of the 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 extend credit to any insider of
the bank or insider of its affiliates in an amount that, when
aggregated with all other extensions of credit to that person, and all
related interests of that person, exceeds $500,000, except by complying
with the requirements of this paragraph (b).
(3) Approval by the board of directors under paragraphs (b)(1)
and (b)(2) 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 requirements of § 215.4(a) of this part.
(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.
{{8-29-97 p.7647}}
(c) Individual lending limit--No member bank may extend
credit to any insider of the bank or insider of its affiliates 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 § 215.2(i) 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 subsidiary or to any other subsidiary of that company.
(d) Aggregate lending limit--(1) General limit.
A member bank may not extend credit to any insider of the bank or
insider of its affiliates 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 such insiders, does not exceed
the bank's unimpaired capital and unimpaired surplus (as defined in
§ 215.2(i) of this part).
(2) Member banks with deposits of less than $100,000,000.
(i) A member bank with deposits of less than $100,000,000 may by
an annual resolution of its board of directors increase the general
limit specified in paragraph (d)(1) of this section to a level not to
exceed two times the bank's unimpaired capital and unimpaired surplus,
if:
(A) The board of directors determines that such higher limit is
consistent with prudent, safe, and sound banking practices 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;
(B) The resolution sets forth the facts and reasoning on which
the board of directors bases the finding, including the amount of the
bank's lending to its insiders as a percentage of the bank's unimpaired
capital and unimpaired surplus as of the date of the resolution;
(C) The bank meets or exceeds, on a fully-phased-in basis, all
applicable capital requirements established by the appropriate federal
banking agency; and
(D) The bank received a satisfactory composite rating in its most
recent report of examination.
(ii) If a member bank has adopted a resolution authorizing a
higher limit pursuant to paragraph (d)(2)(i) of this section and
subsequently fails to meet the requirements of paragraph (d)(2)(i)(C)
or (d)(2)(i)(D) of this section, the member bank shall not extend any
additional credit (including a renewal of any existing extension of
credit) to any insider of the bank or its affiliates unless such
extension or renewal is consistent with the general limit in paragraph
(d)(1) of this section.
(3) Exceptions. (i) The general limit specified in
paragraph (d)(1) of this section does not apply to the following:
(A) Extensions of credit secured by a perfected security interest
in bonds, notes, certificates of indebtedness, or Treasury bills of the
United States or in other such obligations fully guaranteed as to
principal and interest by the United States;
(B) Extensions of credit to or secured by unconditional takeout
commitments or guarantees of any department, agency, bureau, board,
commission or establishment of the United States or any corporation
wholly owned directly or indirectly by the United States;
(C) Extensions of credit secured by a perfected security interest
in a segregated deposit account in the lending bank; or
(D) Extensions of credit arising from the discount of negotiable
or nonnegotiable installment consumer paper that is acquired from an
insider and carries a full or partial recourse endorsement or guarantee
by the insider, provided that:
(1) The financial condition of each maker of such
consumer paper is reasonably documented in the bank's files or known to
its officers;
(2) 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 the obligation and not upon any endorsement or guarantee by
the insider; and
(3) The maker of the instrument is not an
insider.
{{8-29-97 p.7648}}
(ii) The exceptions in paragraphs (d)(3)(i)(A) through
(d)(3)(i)(C) of this section apply only to the amounts of such
extensions of credit that are secured in the manner described therein.
(e) Overdrafts. (1) No member bank may pay an overdraft
of an executive officer or director of the bank or executive officer or
director of its affiliates 3
on an account at the bank, unless the payment of funds is made in
accordance with:
(i) A written, preauthorized, interest-bearing extension of
credit plan that specifies a method of repayment; or
(ii) A written, preauthorized transfer of funds from another
account of the account holder at the bank.
(2) The prohibition in paragraph (e)(1) of this section does not
apply to payment of inadvertent overdrafts on an account in an
aggregate amount of $1,000 or less, provided:
(i) The account is not overdrawn for more than 5 business days;
and
(ii) The member bank charges the executive officer or director
the same fee charged any other customer of the bank in similar
circumstances.
[Codified to 12 C.F.R. § 215.4]
[Section 215.4 amended at 48 Fed. Reg. 42805, September 20, 1983,
effective October 20, 1983; 57 Fed. Reg. 22425, May 28, 1992, effective
May 18, 1992; 58 Fed. Reg. 26508, May 4, 1993, effective May 3, 1993;
58 Fed. Reg. 28494, May 14, 1993, effective May 18, 1993; 59 Fed. Reg.
8838, February 24, 1994, effective February 18, 1994; 59 Fed. Reg.
37930, July 26, 1994, effective July 19, 1994; 61 Fed. Reg. 57770,
November 8, 1996, effective November 4, 1996; 62 Fed. Reg. 13298, March
20, 1997, effective April 1, 1997]
§ 215.5 Additional restrictions on loans to executive officers
of member banks.
The following restrictions on extensions of credit by a member bank
to any of its executive officers apply in addition to any restrictions
on extensions of credit by a member bank to insiders of itself or its
affiliates set forth elsewhere in this part. The restrictions of this
section apply only to executive officers of the member bank and not to
executive officers of its affiliates.
(a) No member bank may extend credit to any of its executive
officers, and no executive officer of a member bank shall borrow from
or otherwise become indebted to the bank, except in the amounts, for
the purposes, and upon the conditions specified in paragraphs (c) and
(d) of this section.
(b) No member bank may extend credit in an aggregate amount greater
than the amount permitted in paragraph (c)(4) of this section to a
partnership in which one or more of the bank's executive officers are
partners and, either individually or together, hold a majority
interest. For the purposes of paragraph (c)(4) of this section, the
total amount of credit extended by a member bank to such partnership is
considered to be extended to each executive officer of the member bank
who is a member of the partnership.
(c) A member bank is authorized to extend credit to any executive
officer of the bank:
(1) In any amount to finance the education of the executive
officer's children;
(2) In any amount to finance or refinance the purchase,
construction, maintenance, or improvement of a residence of the
executive officer, provided:
(i) The extension of credit is secured by a first lien on the
residence and the residence is owned (or expected to be owned after the
extension of credit) by the executive officer; and
(ii) In the case of a refinancing, that only the amount thereof
used to repay the original extension of credit, together with the
closing costs of the refinancing, and any
{{8-29-97 p.7648.01}}additional amount thereof used for
any of the purposes enumerated in this paragraph (c)(2), are included
within this category of credit;
(3) In any amount, if the extension of credit is secured in a
manner described in § 215.4(d)(3)(i)(A) through (d)(3)(i)(C) of this
part; and
(4) For any other purpose not specified in paragraphs (c)(1)
through (c)(3) of this section, if the aggregate amount of extensions
of credit to that executive officer under this paragraph does not
exceed at any one time the higher of 2.5 per cent of the bank's
unimpaired capital and unimpaired surplus or $25,000, but in no event
more than $100,000.
(d) Any extension of credit by a member bank to any of its
executive officers shall be:
(1) Promptly reported to the member bank's board of directors;
(2) In compliance with the requirements of § 215.4(a) of this
part;
(3) Preceded by the submission of a detailed current financial
statement of the executive officer; and
(4) Made subject to the condition in writing that the extension
of credit will, at the option of the member bank, become due and
payable at any time that the officer is indebted to any other bank or
banks in an aggregate amount greater than the amount specified for a
category of credit in paragraph (c) of this section.
[Codified to 12 C.F.R. § 215.5]
[Section 215.5 amended at 47 Fed. Reg. 49348, November 1, 1982; 48
Fed. Reg. 42805, September 20, 1983, effective October 20, 1983; 57
Fed. Reg. 22425, May 28, 1992, effective May 18, 1992; 59 Fed. Reg.
8840, February 24, 1994, effective February 18, 1994; 59 Fed. Reg.
37930, July 26, 1994, effective July 19, 1994; 60 Fed. Reg. 17636,
April 7, 1995]
§ 215.6 Prohibition on knowingly receiving unauthorized
extension of credit.
No executive officer, director, or principal shareholder of a member
bank or any of its affiliates 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 part.
[Codified to 12 C.F.R. § 215.6]
[Section 215.6 amended at 59 Fed. Reg. 8841, February 24, 1994,
effective February 18, 1994]
§ 215.7 Extensions of credit outstanding on March 10, 1979.
(a) Any extension of credit that was outstanding on March 10,
1979, and that would, if made on or after March 10, 1979, violate
§ 215.4(c) of this part, shall be reduced in amount by March 10,
1980, to be in compliance with the lending limit in § 215.4(c) of
this part. Any renewal or extension of such an extension of credit on
or after March 10, 1979, shall be made only on terms that will bring
the extension of credit into compliance with the lending limit of
§ 215.4(c) of this part by March 10, 1980. However, any extension of
credit made
{{6-29-07 p.7649}}before March 10, 1979, that
bears a specific maturity date of March 10, 1980, or later, shall be
repaid in accordance with its 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 paragraph
(a) of this section, the member bank shall promptly report that fact to
the Comptroller of the Currency, in the case of a national 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 credit for
not more than two additional one-year periods.
[Codified to 12 C.F.R. § 215.7]
[Section 215.6 redesignated as § 215.7 at 57 Fed. Reg. 22426, May
28, 1992, effective May 18, 1992; amended at 59 Fed. Reg. 8841,
February 24, 1994, effective February 18, 1994]
§ 215.8 Records of member banks.
(a) In general. Each member bank shall maintain records
necessary for compliance with the requirements of this part.
(b) Recordkeeping for insiders of the member bank. Any
recordkeeping method adopted by a member bank shall:
(1) Identify, through an annual survey, all insiders of the bank
itself; and
(2) Maintain records of all extensions of credit to insiders of
the bank itself, including the amount and terms of each such extension
of credit.
(c) Recordkeeping for insiders of the member bank's
affiliates. Any recordkeeping method adopted by a member bank
shall maintain records of extensions of credit to insiders of the
member bank's affiliates by:
(1) Survey method. (i) Identifying, through an annual
survey, each insider of the member bank's affiliates; and
(ii) Maintaining records of the amount and terms of each
extension of credit by the member bank to such insiders; or
(2) Borrower inquiry method. (i) Requiring as part of
each extension of credit that the borrower indicate whether the
borrower is an insider of an affiliate of the member bank; and
(ii) Maintaining records that identify the amount and terms of
each extension of credit by the member bank to borrowers so identifying
themselves.
(3) Alternative recordkeeping methods for insiders of
affiliates. A member bank may employ a recordkeeping method other
than those identified in paragraphs (c)(1) and (c)(2) of this section
if the appropriate federal banking agency determines that the bank's
method is at least as effective as the identified methods.
(d) Special rule for non-commercial lenders. A member
bank that is prohibited by law or by an express resolution of the board
of directors of the bank from making an extension of credit to any
company or other entity that is covered by this part as a company is
not required to maintain any records of the related interests of the
insiders of the bank or its affiliates or to inquire of borrowers
whether they are related interests of the insiders of the bank or its
affiliates.
[Codified to 12 C.F.R. § 215.8]
[Section 215.7 redesignated as § 215.8 at 57 Fed. Reg. 22426, May
28, 1992, effective May 18, 1992; amended at 59 Fed. Reg. 8841,
February 24, 1994, effective February 18, 1994]
§ 215.9 Disclosure of credit from member banks to executive
officers and principal shareholders.
(a) Definitions. For the purposes of this section, the
following definitions apply:
(1) Principal shareholder of a member bank means any
person, other than an insured bank, or a foreign bank as defined in
12 U.S.C. 3101(7), that,
directly or indirectly, owns,
{{6-29-07 p.7650}}controls, or has power to vote
more than 10 percent of any class of voting securities of the member
bank. The term includes a person that controls a principal shareholder
(e.g., a person that controls a bank holding company). Shares of a bank
(including a foreign bank), bank holding company, or other company
owned or controlled by a member of an individual's immediate family are
presumed to be owned or controlled by the individual for the purposes
of determining principal shareholder status.
(2) Related interest means:
(i) Any company controlled by a person; or
(ii) Any political or campaign committee the funds or services of
which will benefit a person or that is controlled by a person. For the
purpose of this section, a related interest does not include a bank or
a foreign bank (as defined in 12 U.S.C. 3101(7)).
(b) Public disclosure. (1) 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, 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 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 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.
(2) A member bank is not required to disclose the specific
amounts of individual extensions of credit.
(c) Maintaining records. Each member bank shall maintain
records of all requests for the information described in paragraph (b)
of this section and the disposition of such requests. These records may
be disposed of after two years from the date of the request.
[Codified to 12 C.F.R. § 215.9]
[Section 215.10 added at 44 Fed. Reg. 67979, November 28,
1979, effective December 31, 1979; 48 Fed. Reg. 56936, December 27,
1983, effective December 31, 1983; 49 Fed. Reg. 2902, January 24, 1984;
redesignated as § 215.11 at 57 Fed. Reg. 22426, May 28, 1992,
effective May 18, 1992; amended at 59 Fed. Reg. 8841, February 24,
1994, effective February 18, 1994; 59 Fed. Reg. 37930, July 26, 1994,
effective July 19, 1994; redesignated as 211.9 at 71 Fed. Reg. 71474,
December 11, 2006; 72 Fed. Reg. 30470, June 1, 2007, effective July 2,
2007]
§ 215.10 Reporting requirement for credit secured by
certain bank stock.
Each executive officer or director of a member bank the shares of
which are not publicly traded shall report annually to the board of
directors of the member bank the outstanding amount of any credit that
was extended to the executive officer or director and that is secured
by shares of the member bank.
[Codified to 12 C.F.R. § 215.10]
[Section 215.12 added at 57 Fed. Reg. 22426, May 28, 1992,
effective May 18, 1992; redesignated as 211.10 at 71 Fed. Reg. 71474,
December 11, 2006; 72 Fed. Reg. 30470, June 1, 2007, effective July 2,
2007]
§ 215.11 Civil penalties.
Any member bank, or any officer, director, employee, agent, or other
person participating in the conduct of the affairs of the bank, that
violates any provision of this part (other than § 215.9) is subject
to civil penalties as specified in section 29 of the Federal Reserve
Act (12 U.S.C. 504).
[Codified to 12 C.F.R. § 215.11]
[Section 215.11 added at 44 Fed. Reg. 67979,
November 28, 1979, effective December 31, 1979; redesignated as 215.13
and amended at 57 Fed. Reg. 22426, May 28, 1992, effective May 18,
1992; 59 Fed. Reg. 8842, February 24, 1994, effective February 18,
1994; redesignated as 211.11 at 71 Fed. Reg. 71474, December 11, 2006;
amended at 71 Fed. Reg. 71475, December 11,2006; 72 Fed. Reg. 30470,
June 1, 2007, effective July 2, 2007]
{{12-29-06 p.7651}}
1The term is not intended to include persons who may have
official titles and may exercise a certain measure of discretion in the
performance of their duties, including discretion in the making of
loans, but who do not participate in the determination of major
policies of the bank or company 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 assistant manager
of a branch of a bank unless that individual participates, or is
authorized to participate, in major policymaking functions of the bank
or company. Go Back to Text
2Where 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 established by applicable state
laws shall be the lending limit for the state member bank. Go Back to Text
3This 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 principal shareholder of the member bank or
executive officer, director, or principal shareholder of its
affiliates. Go Back to Text
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