No, the loan to the corporation controlled by the executive officer is not subject to Regulation O’s specific restrictions on loans to “executive officers.” However, you are correct that the loan would be subject to all of Regulation O’s restrictions on loans to “insiders.”

Under Regulation O, the definition of “insider” means any executive officer, director, or principal shareholder, and “includes any related interest of such a person.” A “related interest” includes a company controlled by an executive officer. Consequently, Regulation O’s restrictions on loans to “insiders” apply to a loan to company controlled by an executive officer, regardless of whether the executive officer is obligated on the loan.

In contrast, the definition of “executive officer” does not include the related interests of the executive officer. Therefore, a loan to a related interest of the executive officer (such as a company controlled by the executive officer) would not be subject to the specific restrictions on loans to executive officers — unless the executive officer was personally obligated on the loan, which is not the case here. We reached out to an attorney for the FDIC who confirmed that this interpretation of Regulation O is correct.   

For resources related to our guidance, please see:

• Regulation O, 12 CFR 215.4 (General prohibitions on loans to insiders)

• Regulation O, 12 CFR 215.5 (Additional restrictions on loans to executive officers)

• Regulation O, 12 CFR 215.2(h) (“Insider means an executive officer, director, or principal shareholder, and includes any related interest of such a person.”)

• Regulation O, 12 CFR 215.2(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.”)

• Regulation O, 12 CFR 215.2(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. 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.”)