Answer:
I am afraid tha Regulation O is not as clear as it could be on this point. Regulation O expressly requires prior board approval of "extensions of credit" above certain amounts. It defines the term "extension of credit" to include the granting of a line of credit. That implies that you only need prior board approval once, i.e. before the line is granted. However, Regulation O, in its prior board approval requirement (12 CFR 215.4(3), expressly states that board approval "is not required for an extension of credit that is made pursuant to a line of credit that was approved" within the prior 14 months. This implies that advances under a pre-approved line must get prior board approval if the line was approved more than 14 months ago. As a practical matter, I believe most banks take the more conservative approach and get board approval every year, thereby satisfying the 14-month implied requirement.
First published on BankersOnline.com 3/11/02
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