Topic: Insider Loans
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Does Regulation O apply to a loan to a partnership if one of the partners is a director’s spouse and is personally guaranteeing the loan? The director has no ownership interest in the partnership, but the director’s spouse did submit a joint financial statement with the loan application.
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Whether Regulation O applies to a particular transaction is a fact-specific determination that we cannot make without more information. From what you have told us, the director’s spouse would not be considered an insider of the bank, meaning that Regulation O would not apply to an extension of credit to the spouse or a company…
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We have a candidate in mind for the chairman of our board. The candidate has an outstanding loan of $XXX,XXX, so we are concerned about Regulation O. However, the chairman would not make any individual policy decisions for the bank. Does Regulation O apply?
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It is possible that the loan can be grandfathered, provided that it did not violate Regulation O at the time it was made. If you are concerned about whether the loan originally complied with Regulation O, you should confirm that it was not made on preferential terms and did not exceed the applicable Regulation O…
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Are there any provisions under Illinois law regarding loan discounts to employees? Can we extend a discount on loan interest rates to our directors and officers as well as our employees?
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Yes, we believe you may extend a discount on loan interest rates to your officers and directors as well as your employees, and we are not aware of any Illinois laws that would prohibit such a program. As to federal law, Regulation O includes an exception to its requirement that loans to employees be provided…
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Can we offer overdraft protection programs on our deposit accounts for bank employees?
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We are not aware of any Illinois law that would prohibit a bank employee from overdrawing his or her account. We also are not aware of any state or federal law that would prohibit a bank from applying its overdraft protection program to an employee, provided that the program otherwise complies with the requirements for…
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What are the lending limits that apply to loans to employees? Would they apply even if an employee has no decision-making power?
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Section 37 of the Illinois Banking Act states that the lending limits are to be “determined by the Commissioner,” meaning that they are to be determined by rule. The rules apply broadly to all “officers, employees, directors or to corporations or firms controlled by them or in the management of which any of them are…