It is unlikely that a director’s payment of his son’s down payment would cause the son’s mortgage loan to be considered an “extension of credit” to a bank insider. Regulation O generally covers “extensions of credit” made to bank “insiders,” including the board of directors. However, the term “insider” does not include family members of insiders, and therefore we do not believe that Regulation O would apply to transactions with the director’s son.

Also note that Regulation O covers any transaction that delivers a “tangible economic benefit” to an insider. But if the director does not receive any economic benefit from the transaction (as you have indicated to us), then we don’t see any reason why this provision would apply. And, an exception to this provision applies to loans that meet the insider loan requirements of subsection 215.4(a), provided that the loan proceeds are used in a bona fide transaction to acquire goods or services from the insider. 12 CFR 215.3(f). For example, a FRB Interpretive Letter found that a director received a tangible economic benefit when the bank made a loan to his adult son, because the son used the loan proceeds to pay back a loan to his father. However, the letter concluded that the loan qualified for the exception described above, and therefore the transaction did not violate Regulation O. FRB Interpretive Letter (December 10, 1998).