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Fed requests comment on proposal to modernize Regulation O credit rule

The update would refresh Regulation O’s dollar-based thresholds by linking them to economic growth going forward, while keeping safeguards against preferential treatment.

Reported · Written up by our desk · Government Bonds

The Federal Reserve Board has requested public comment on a proposal to modernize Regulation O, the rule that governs how banks extend credit to insiders, including bank executives, board members, and major shareholders who could influence lending decisions, according to the Fed.

The proposal aims to update outdated dollar-based thresholds and index them to economic growth over time. It also would maintain safeguards intended to prevent preferential treatment, the Fed said.

The Fed noted that Regulation O has not been comprehensively updated since 1979. It said the rule addresses a specific challenge for community banks, where board members and executives are often local business owners and civic leaders who bring local economic insight to bank governance.

Comments are due 60 days after the proposal is published in the Federal Register. Vice Chair for Supervision Michelle W. Bowman said the changes are meant to keep the thresholds relevant while preserving necessary conflict-of-interest protections.

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