Prior Board Approval under Reg O

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Question:

Our bank falls under the $500,000 prior board approval requirement for extensions of credit to an insider. If I understand Regulation O correctly, exceptions under general prohibitions only apply to the aggregate lending limit when the loan is secured by a CD. If a loan is made to an insider for more than $500,000 and is secured by a CD in our bank, is prior board approval required?

Answer:

Your sense of the situation is correct. Prior approval is required, even if the loan is fully secured by a CD. And don't forget that the other provisions of Section 215.5 also apply. That includes submission of a detailed personal financial statement, notwithstanding the secured nature of the loan.

First published on BankersOnline.com 1/6/03