Reg O Flashcards
Regulation O covers loans to:
executives officers, directors, and principal share holds (insiders)
Reg O defines control as:
* generally owning, controlling, or having power to vote (directly or indirectly) 25% or more of any class of voting securities of the company
* generally owning, controlling, or having power to vote more than 10% of any class of voting securities when no one has a greater percentage of that class of voting securities
* an officer with the power to vote more than 10% or more of any class of voting securities
* controlling the election of a majority of the directors in any manner
Debts of ________ are not considered a Reg O extension of credit if represented by charge accounts, time accounts, or credit cards
$15,000 or less
Reg O prohibits banks from lending to insiders unless:
the credit is made on substantially the same terms and following the credit underwriting standards as those who are not insiders (does not include employee benefit programs applies to all employees)
Bank may not lend to any insider amounts that exceed ______________ unless approved by the board and the interested party abstains from voting.
* higher of $25,000 OR
*5% of the bank’s capital and unimpaired surplus (up to $500,000)
What is the maximum aggregate amount that may be extended to a single insider?
* equal to the bank’s legal lending limit (15% of the unimpaired capital and surplus) OR
* an additional 10% for loans fully secured by readily marketable collateral
What is the maximum aggregate amount that may be extended to a all of its insiders?
100% of its unimpaired capital and surplus (known as the aggregate lending limit)
T or F
In specific cases banks may increase their aggregate lending limit to 200%.
TRUE
No bank may pay an overdraft of an executive officer or director unless the payment is made:
* under a written preauthorized credit plan that specifies the method of repayment OR
* pursuant to a written agreement to transfer funds from another account
A bank may pay inadvertent overdrafts of ___________ if the account is not overdrawn for ________________ and the officer or director is charged the same fee charged to other customers under the same circumstances.
* $1000 or less (in the aggregate)
* more than 5 business days
Loans to executive officers must include a provision that the loan is payable on demand if the officer becomes indebted to any other bank in:
an aggregate amount greater than the amount the officer could borrower from their own bank under Reg O
T or F
Officers and directors must report loans to the board of directors.
TRUE
On written request from a member of the public, the bank must disclose the names of each of its officers and principal shareholders to whom the bank had aggregate credit outstanding at the end of the latest quarter that:
equaled or exceeded 5% of the banks capital and unimpaired surplus or $500,000, whichever is less (no disclosure is required if agree is less than $25,000 and no individual loan disclosures are required)
How long must records of compliance with public disclosures be maintained?
two years
All banks must have a recordkeeping system that includes either:
* an annual survey of insiders to identity related interests OR
* a requirement as part of each extension of credit that the borrower indicates whether he or she is an insider OR
* any other method approved by the regulators to be as effective as that required by regulation
What are the civil penalties possible under Reg O?
$5,000 per day for banks, directors, officers, employees, agents, or other persons participating in conducting the affairs of the bank
What is the best way to evaluate the bank’s compliance with the overdraft provisions of Regulation O?
review the bank’s overdraft reports for a time period and determine whether any insider accounts are overdrawn
What is the longest time after board approval that a bank can approve a line of credit for an executive officer?
14 months of such approval
T or F
An advance against accrued salary or other accrued compensation is not an extension of credit.
TRUE
The board of directors may exclude officers from the definition of executive officer, but such a resolution will not:
be effective if the officer actually participates in major policymaking at the bank
What is the definition of the term executive officer?
Anyone who has the authority to participate in major policymaking functions at the bank (This definition is not limited to employees. Anyone who participates in such policymaking functions is covered, even someone not paid a salary by the bank)
Reg O allows for an insider to have an overdraft line of up to _________ that will not count towards their aggregate loan amounts.
$5,000
What are the general loan restrictions for executive officers?
* no loans over 2.5% of capital or $100,000 except for 1 residence loan or children education loans
* all loans must contain call provision
