Title 12--Banks and Banking

CHAPTER II--FEDERAL RESERVE SYSTEM

PART 215--LOANS TO EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL SHAREHOLDERS OF MEMBER BANKS (REGULATION O)

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Sec. 215.1 Authority, purpose and scope.
    

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 Subpart A--Loans by Member Banks to Their Executive Officers, Directors, 
                       and Principal Shareholders
    
Source: Reg. O, 59 FR 8837, Feb. 24, 1994, unless otherwise noted.

    (a) Authority. This subpart is issued pursuant to sections 11(i), 
22(g), and 22(h) of the Federal Reserve Act (12 U.S.C. 248(i), 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. This subpart A governs any extension of 
credit by a member bank to an executive officer, director, or principal 
shareholder of: The member bank; a bank holding company of which the 
member bank is a subsidiary; and any other subsidiary of that bank 
holding company. It also applies to any extension of credit by a member 
bank to: A company controlled by such a person; and a political or 
campaign committee that benefits or is controlled by such a person. This 
subpart A also implements the reporting requirements of 12 U.S.C. 375a 
concerning extensions of credit by a member bank to its executive 
officers and of 12 U.S.C. 1817(k) concerning extensions of credit by a 
member bank to its executive officers or principal shareholders, or the 
related interests of such persons.

Sec. 215.2 Definitions.
     

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Subpart A--Loans by Member Banks to Their Executive Officers, Directors, 
                       and Principal Shareholders

    For the purposes of this subpart A, 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

[[Page 363]]

    (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)(1) Director of a company or bank 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 Secs. 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
    (B) Is not controlled by any other company; and
    (iv) The director of the affiliate is not otherwise subject to 
Secs. 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 participate 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.
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    \1\ The 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.
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    (2) Extensions of credit to an executive officer of an affiliate of 
a bank are not subject to Secs. 215.4, 215.6, and 215.8 if--
    (i) The executive officer is excluded, by resolution of the board of 
directors

[[Page 364]]

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 Secs. 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 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:
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    \2\ Where 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.
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    (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 USC 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(s)) and regardless of the operation of 12 
U.S.C. 1813(h) and 12 U.S.C. 1828(j)(3)(B).
    (k) Pay an 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.

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    (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.

[Reg. O, 59 FR 8837, Feb. 24, 1994; 59 FR 37930, July 26, 1994, as 
amended at 60 FR 31054, June 13, 1995; 61 FR 57770, Nov. 8, 1996; 62 FR 
13298, Mar. 20, 1997]

Sec. 215.3 Extension of credit.
     

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Subpart A--Loans by Member Banks to Their Executive Officers, Directors, 
                       and Principal Shareholders

    (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 Sec. 208.24 of this chapter;
    (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 Sec. 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;

[[Page 366]]

    (6) Indebtedness of $5,000 or less arising by reason of an interest-
bearing overdraft credit plan of the type specified in Sec. 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 Sec. 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.
    (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 Sec. 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.

[Reg. O, 59 FR 8837, Feb. 24, 1994; 59 FR 37930, July 26, 1994; 63 FR 
58621, Nov. 2, 1998]

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Subpart A--Loans by Member Banks to Their Executive Officers, Directors, 
                       and Principal Shareholders
                       
    (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 paragraph (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

[[Page 367]]

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 Sec. 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.
    (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 Sec. 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 Sec. 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;

[[Page 368]]

    (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.
    (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:
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    \3\ This 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.
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    (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.

[Reg. O, 59 FR 8837, Feb. 24, 1994; 59 FR 37930, July 26, 1994, as 
amended at 61 FR 57770, Nov. 8, 1996; 62 FR 13298, Mar. 20, 1997]

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Subpart A--Loans by Member Banks to Their Executive Officers, Directors, 
                       and Principal Shareholders
                       
    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 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 Sec. 215.4(d)(3)(i)(A) through (d)(3)(i)(C) of this part; 
and

[[Page 369]]

    (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 Sec. 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.

[Reg. O, 59 FR 8837, Feb. 24, 1994; 59 FR 37930, July 26, 1994; 60 FR 
17636, Apr. 7, 1995]

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Subpart A--Loans by Member Banks to Their Executive Officers, Directors, 
                       and Principal Shareholders

    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.

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Subpart A--Loans by Member Banks to Their Executive Officers, Directors, 
                       and Principal Shareholders
 
    (a) Any extension of credit that was outstanding on March 10, 1979, 
and that would, if made on or after March 10, 1979, violate 
Sec. 215.4(c) of this part, shall be reduced in amount by March 10, 
1980, to be in compliance with the lending limit in Sec. 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 
Sec. 215.4(c) of this part by March 10, 1980. However, any extension of 
credit made 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.

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Subpart A--Loans by Member Banks to Their Executive Officers, Directors, 
                       and Principal Shareholders
                       
    (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

[[Page 370]]

    (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.

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Subpart A--Loans by Member Banks to Their Executive Officers, Directors, 
                       and Principal Shareholders
 
    Each executive officer of a member bank who becomes indebted to any 
other bank or banks in an aggregate amount greater than the amount 
specified for a category of credit in Sec. 215.5(c) of this part, shall, 
within 10 days of the date the indebtedness reaches such a level, make a 
written report to the board of directors of the officer's bank. The 
report shall state the lender's name, the date and amount of each 
extension of credit, any security for it, and the purposes for which the 
proceeds have been or are to be used.

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Subpart A--Loans by Member Banks to Their Executive Officers, Directors, 
                       and Principal Shareholders
                       
     Each member bank shall include with (but not as part of) each report 
of condition (and copy thereof) filed pursuant to 12 U.S.C. 1817(a)(3) a 
report of all extensions of credit made by the member bank to its 
executive officers since the date of the bank's previous report of 
condition.

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Subpart A--Loans by Member Banks to Their Executive Officers, Directors, 
                       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 \4\ 
other than an insured bank, or a foreign bank as defined in 12 U.S.C. 
3101(7), that, directly or indirectly, owns, 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.
---------------------------------------------------------------------------

    \4\ The term ``stockholder of record'' appearing in 12 U.S.C. 
1972(2)(G) is synonymous with the term ``person.''
---------------------------------------------------------------------------

    (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 and subpart B of this part, 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

[[Page 371]]

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.

[Reg. O, 59 FR 8837, Feb. 24, 1994; 59 FR 37930, July 26, 1994]

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Subpart A--Loans by Member Banks to Their Executive Officers, Directors, 
                       and Principal Shareholders
 
    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.

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Subpart A--Loans by Member Banks to Their Executive Officers, Directors, 
                       and Principal Shareholders
 
    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 Sec. 215.11 of this 
part) is subject to civil penalties as specified in section 29 of the 
Federal Reserve Act (12 U.S.C. 504).

     Appendix--Section 5200 of the Revised Statutes Total Loans and 
                          Extensions of Credit

    (a)(1) The total loans and extensions of credit by a national 
banking association to a person outstanding at one time and not fully 
secured, as determined in a manner consistent with paragraph (2) of this 
subsection, by collateral having a market value at least equal to the 
amount of the loan or extension of credit shall not exceed 15 per centum 
of the unimpaired capital and unimpaired surplus of the association.
    (2) The total loans and extensions of credit by a national banking 
association to a person outstanding at one time and 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 funds outstanding shall not exceed 10 per centum of 
the unimpaired capital and unimpaired surplus of the association. This 
limitation shall be separate from and in addition to the limitations 
contained in paragraph (1) of this subsection.

                               Definitions

    (b) For the purposes of this section--
    (1) The term loans and extensions of credit shall include all direct 
or indirect advances of funds to a person made on the basis of any 
obligation of that person to repay the funds or repayable from specific 
property pledged by or on behalf of the person, and to the extent 
specified by the Comptroller of the Currency, such term shall also 
include any liability of a national banking association to advance funds 
to or on behalf of a person pursuant to a contractual commitment; and
    (2) The term person shall include an individual, sole 
proprietorship, partnership, joint venture, association, trust, estate, 
business trust, corporation, sovereign government, or agency, 
instrumentality, or political subdivision thereof, or any similar entity 
or organization.

                               Exceptions

    (c) The limitations contained in subsection (a) of this section 
shall be subject to the following exceptions:
    (1) Loans or extensions of credit arising from the discount of 
commercial or business paper evidencing an obligation to the person 
negotiating it with recourse shall not be subject to any limitation 
based on capital and surplus.
    (2) The purchase of bankers' acceptances of the kind described in 
section 372 of this title and issued by other banks shall not be subject 
to any limitation based on capital and surplus.
    (3) Loans and extensions of credit secured by bills of lading, 
warehouse receipts, or similar documents transferring or securing title 
to readily marketable staples shall be subject to a limitation of 35 per 
centum of capital and surplus in addition to the general limitations if 
the market value of the staples securing each additional loan or 
extension of credit at all times equals or exceeds 115 per centum of the 
outstanding amount of such loan or extension of credit. The staples 
shall be fully covered by insurance whenever it is customary to insure 
such staples.
    (4) Loans or extensions of credit secured by bonds, notes, 
certificates of indebtedness, or Treasury bills of the United States or 
by other such obligations fully guaranteed as to principal and interest 
by the United States shall not be subject to any limitation based on 
capital and surplus.

[[Page 372]]

    (5) Loans or 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 
shall not be subject to any limitation based on capital and surplus.
    (6) Loans or extensions of credit secured by a segregated deposit 
account in the lending bank shall not be subject to any limitation based 
on capital and surplus.
    (7) Loans or extensions of credit to any financial institution or to 
any receiver, conservator, superintendent of banks, or other agent in 
charge of the business and property of such financial institution, when 
such loans or extensions of credit are approved by the Comptroller of 
the Currency, shall not be subject to any limitation based on capital 
and surplus.
    (8)(A) Loans and extensions of credit arising from the discount of 
negotiable or nonnegotiable installment consumer paper which carries a 
full recourse endorsement or unconditional guarantee by the person 
transferring the paper shall be subject under this section to a maximum 
limitation equal to 25 per centum of such capital and surplus, 
notwithstanding the collateral requirements set forth in subsection 
(a)(2) of this section.
    (B) If the bank's files or the knowledge of its officers of the 
financial condition of each maker of such consumer paper is reasonably 
adequate, and 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 
such loans or extensions of credit and not upon any full or partial 
recourse endorsement or guarantee by the transferor, the limitations of 
this section as to the loans or extensions of credit of each such maker 
shall be the sole applicable loan limitations.
    (9)(A) Loans and extensions of credit secured by shipping documents 
or instruments transferring or securing title covering livestock or 
giving a lien on livestock when the market value of the livestock 
securing the obligation is not at any time less than 115 per centum of 
the face amount of the note covered, shall be subject under this section 
notwithstanding the collateral requirements set forth in subsection 
(a)(2) of this section, to a maximum limitation equal to 25 per centum 
of such capital and surplus.
    (B) Loans and extensions of credit which arise from the discount by 
dealers in dairy cattle of paper given in payment for dairy cattle, 
which paper carries a full recourse endorsement or unconditional 
guarantee of the seller, and which are secured by the cattle being sold, 
shall be subject under this section, notwithstanding the collateral 
requirements set forth in paragraph (a)(2) of this section, to a 
limitation of 25 per centum of such capital and surplus.
    (10) Loans or extensions of credit to the Student Loan Marketing 
Association shall not be subject to any limitation based on capital and 
surplus.

                Authority of Comptroller of the Currency

    (d)(1) The Comptroller of the Currency may prescribe rules and 
regulations to administer and carry out the purposes of this section, 
including rules or regulations to define or further define terms used in 
this section and to establish limits or requirements other than those 
specified in this section for particular classes or categories of loans 
or extensions of credit.
    (2) The Comptroller of the Currency also shall have authority to 
determine when a loan putatively made to a person shall for purposes of 
this section be attributed to another person.

[48 FR 42806, Sept. 20, 1983]

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Subpart B--Reports on Indebtedness of Executive Officers and Principal 
                   Shareholders to Correspondent Banks
                   
    (a) Authority. This subpart is issued pursuant to section 11(i) of 
the Federal Reserve Act (12 U.S.C. 248(i)) and 12 U.S.C. 1972(2)(F)(vi).
    (b) Purpose and scope. This subpart implements the reporting 
requirements of Title VIII of the Financial Institutions Regulatory and 
Interest Rate Control Act of 1978 (FIRA) (Pub. L. 95-630) as amended by 
the Garn-St Germain Depository Institutions Act of 1982 (Pub. L. 97-
320), 12 U.S.C. 1972 (2)(g). Title VIII prohibits (1) preferential 
lending by a bank to executive officers, directors, and principal 
shareholders of another bank when there is a correspondent account 
relationship between the banks, and (2) the opening of a correspondent 
account relationship between banks where there is a preferential 
extension of credit by one of the banks to an executive officer, 
director, or principal shareholder of the other bank.

[44 FR 67979, Nov. 28, 1979, as amended at 48 FR 56936, Dec. 27, 1983]

[[Page 373]]

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 Subpart B--Reports on Indebtedness of Executive Officers and Principal 
                   Shareholders to Correspondent Banks
                   
     For the purposes of this subpart, the following definitions apply 
unless otherwise specified:
    (a) Bank has the meaning given in 12 U.S.C. 1971 and 1972, and 
includes a branch or agency of a foreign bank, or a commercial lending 
company controlled by a foreign bank or by a company that controls a 
foreign bank, where the branch or agency is maintained in a State of the 
United States or in the District of Columbia or the commercial lending 
company is organized under State law.
    (b) Company, control of a company or bank, executive officer, 
extension of credit, immediate family, and person have the meanings 
provided in subpart A.
    (c) Correspondent account is an account that is maintained by a bank 
with another bank for the deposit or placement of funds. A correspondent 
account does not include:
    (1) Time deposits at prevailing market rates, and
    (2) An account maintained in the ordinary course of business solely 
for the purpose of effecting federal funds transactions at prevailing 
market rates or making Eurodollar placements at prevailing market rates.
    (d) Correspondent bank means a bank that maintains one or more 
correspondent accounts for a member bank during a calendar year that in 
the aggregate exceed an average daily balance during that year of 
$100,000 or 0.5 per cent of such member bank's total deposits (as 
reported in its first consolidated report of condition during that 
calendar year), which ever amount is smaller.
    (e) Principal shareholder and related interest have the meanings 
provided in Sec. 215.10 of Subpart A.

[Reg. O, 44 FR 67979, Nov. 28, 1979, as amended at 48 FR 42805, Sept. 
20, 1983; 59 FR 8842, Feb. 24, 1994]

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Subpart B--Reports on Indebtedness of Executive Officers and Principal 
                   Shareholders to Correspondent Banks
 
    (a) Annual report. If during any calendar year an executive officer 
or principal shareholder of a member bank or a related interest of such 
a person has outstanding an extension of credit from a correspondent 
bank of the member bank, the executive officer or principal shareholder 
shall, on or before January 31 of the following year, make a written 
report to the board of directors of the member bank.\5\
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    \5\ Persons reporting under this section are not required to include 
information on extensions of credit that are fully described in a report 
by a person they control or a person that controls them, provided they 
identify their relationships with such other person.
---------------------------------------------------------------------------

    (b) Contents of report. The report required by this section shall 
include the following information:
    (1) The maximum amount of indebtedness of the executive officer or 
principal shareholder and of each of that person's related interests to 
each of the member bank's correspondent banks during the calendar year;
    (2) The amount of indebtedness of the executive officer or principal 
shareholder and of each of that person's related interests outstanding 
to each of the member bank's correspondent banks as of ten business days 
before the report required by this section is filed;\6\ and
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    \6\ If the amount of indebtedness outstanding to a correspondent 
bank ten days before the filing of the report is not available or cannot 
be readily ascertained, an estimate of the amount of indebtedness may be 
filed with the report, provided that the report is supplemented within 
the next 30 days with the actual amount of indebtedness.
---------------------------------------------------------------------------

    (3) A description of the terms and conditions (including the range 
of interest rates, the original amount and date, maturity date, payment 
terms, security, if any, and any other unusual terms or conditions) of 
each extension of credit included in the indebtedness reported under 
paragraph (b)(1) of this section.
    (c) Definitions. For the purposes of this section:
    (1) Indebtedness means an extension of credit, but does not include:
    (i) Commercial paper, bonds, and debentures issued in the ordinary 
course of business; and
    (ii) Consumer credit (as defined in 12 CFR 226.2(a)(12) in an 
aggregate amount of $5,000 or less from each of the member bank's 
correspondent banks, provided the indebtedness is incurred under terms 
that are not more favorable than those offered to the general public.

[[Page 374]]

    (2) Maximum amount of indebtedness means, at the option of the 
reporting person, either (i) the highest outstanding indebtedness during 
the calendar year for which the report is made, or (ii) the highest end 
of the month indebtedness outstanding during the calendar year for which 
the report is made.
    (d) Retention of reports at member banks. The reports required by 
this section shall be retained at the member bank for a period of three 
years. The Reserve Bank or the Comptroller, as the case may be, may 
require these reports to be retained by the bank for an additional 
period of time. The reports filed under this section are not required by 
this regulation to be made available to the public and shall not be 
filed with the Reserve Bank or the Comptroller unless specifically 
requested.
    (e) Member bank's responsibility. Each member bank shall advise each 
of its executive officers and each of its principal shareholders (to the 
extent known by the bank) of the reports required by this section and 
make available to each of these persons a list of the names and 
addresses of the member bank's correspondent banks.

[Reg. O, 44 FR 67979, Nov. 28, 1979, as amended at 48 FR 42805, Sept. 
20, 1983; 59 FR 8842, Feb. 24, 1994]

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 Subpart B--Reports on Indebtedness of Executive Officers and Principal 
                   Shareholders to Correspondent Banks
 
    (a) 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, any correspondent bank of the member bank had 
outstanding, at any time during the previous calendar year, an extension 
of credit that, when aggregated with all other outstanding extensions of 
credit at such time from all correspondent banks of 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 from all correspondent banks of 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 at any 
time during the previous calendar year.
    (2) A member bank is not required to disclose the specific amounts 
of individual extensions of credit.
    (b) Maintaining records. Each member bank shall maintain records of 
all requests for the information described in paragraph (a) of this 
section and the disposition of such requests. These records may be 
disposed of after two years from the date of the request.

[48 FR 56936, Dec. 27, 1983]

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