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4000 - Advisory Opinions


Determining Whether an Employee of a Bank is an "Executive Officer" under Regulation O

FDIC--94--22

May 24, 1994

Mark A. Mellon, Senior Attorney

The following is in response to your letter of April 8, 1994. In your letter, you ask the FDIC to interpret the terms "authority to participate" and "major policymaking functions" for the purpose of determining whether an employee of a bank is an "executive officer" under 12 C.F.R. Part 215, Regulation O ("Regulation O") and the regulations of the FDIC.

Section 215.2(d)(1) of Regulation O defines an executive officer as a person who participates or has authority to participate (other than in the capacity of a director) in major policymaking functions of a 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. The chairman of the board, the president, every vice president, the cashier, the secretary, and the treasurer of a bank are considered executive officers unless the officer is excluded, by resolution of the board of directors or by the bylaws of the bank, 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.

The terms "authority to participate" and "major policymaking functions" are not defined by Regulation O. When considering whether a bank employee is an executive officer for purposes of Regulation O, the FDIC determines on a case-by-case basis whether the employee is responsible for both the formulation and implementation of a bank's policy. An employee whose sole responsibility is the administration of bank policy would not be considered an executive officer for purposes of Regulation O. A footnote to section 215.2(d)(1) states that the term "executive officer" is not intended to include persons who have official titles and may exercise discretion in the performance of their duties but who do not participate in the determination of a bank's major policies and whose decisions are limited by policy standards fixed by the bank's senior management.

Your letter specifically inquires whether a vice president who is responsible for the lending policy and procedures of the commercial loan department of a bank would be participating in major policymaking functions. Your letter indicates that the vice president heads the bank's commercial loan department but has not been designated an executive officer by the bank's board of directors. The vice president makes lending policies that are neither commissioned or directed by a board designated executive officer, however, all such policies are subject to the review and approval of a board designated executive officer. You also inquire whether the authority to participate in major policymaking functions only extends to the person who ultimately approves a policy and not to the person (here, the vice president) who creates the policy.

As section 215.2(d)(1) states that a vice president is considered to be an executive officer for purposes of Regulation O unless the vice president has been excluded from participation from major policymaking functions of the bank, either by a resolution of the board of directors or by the bylaws of the bank, and the vice president does not actually participate in major policymaking functions, the vice president would be deemed an executive officer for purposes of Regulation O. Even if this individual did not hold the title of vice president, it is our opinion that he should still be considered an executive officer for purposes of Regulation O since the individual plays a role in the formulation and implementation of the bank's lending policies. Even though the decisions are subject to review and approval by a board designated executive officer, the individual still participates in the formulation of those policies and is not merely applying policies already established by another person.

Finally, your letter asks whether major policymaking functions are limited to lending or whether functions such as human resources, credit and audit would be included as major policymaking functions. As noted before, the term "major policymaking function" is not defined by Regulation O. The FDIC will look at the facts of a particular situation to determine whether a bank employee's responsibilities give the individual the authority to participate in the bank's major policymaking functions. Some bank functions that have been deemed to be of key importance, however, are: audits, investments and trust activities. See The Director's Book: The Role of a National Bank Director, The Office of the Comptroller of the Currency, August 1987, at pp. 12--14.

I hope that this letter has been responsive to your inquiry. Please do not hesitate to contact me if you should have any questions about this or any other matter.


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