FDIC Law, Regulations, Related Acts
4000 - Advisory Opinions
Request for Extension of Time under Regulation O
April 1, 1980
Pamela E.F. LeCren, Attorney
*** has been scheduled concerning a request by *** for an extension of time under section 215.6(b) of Regulation O to bring loans to insiders into compliance with the statutory loan limit. In particular, *** the bank's newly elected chairman of the board, has loans in the area of $400,000. The bank's lending limit to insiders is $66,100. Section 215.6(b) permits up to two one year extensions from March 10, 1980 in which the bank is to comply with the loan limit. Extensions may be granted upon a finding of good cause.
Federal Reserve Board Regulation O is prospective in nature. It prohibits extensions of credit over the statutory ceiling to persons that are subject thereto. It does not prohibit the maintenance of loans in excess of that ceiling if the loans when made were extended to an individual who was not subject to the loan ceiling, i.e., a director or other person who is not an executive officer1 or principal shareholder. In short, after-acquired status will not give rise to a Regulation O violation,2 nor does section 215.6 apply in such circumstances.
The loans made to *** were extended prior to his being elected chairman of the board and when he was not subject to the loan ceiling. Therefore the extension of those loans in an amount exceeding the statutory loan ceiling is not a violation of the regulation nor is the maintenance of those loans a violation. They may be paid down in accordance with their existing schedule. No new extensions of credit may be made to *** however, until such time as his outstanding indebtedness is below the statutory ceiling.
1 The chairman of the board of a bank is presumed to be an executive officer as that term is defined in § 215.2(d) of Regulation O. Go back to Text
2 The one exception in our opinion is where the loan is made in contemplation of the borrower becoming an executive officer or principal shareholder. Go back to Text