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Fed seeks comment on updated Regulation O for bank insider lending

The proposal would update Regulation O's outdated dollar thresholds and index them to economic growth, with comments due 60 days after publication.

Reported · Written up by our desk · Central Banks

The Federal Reserve Board on Friday requested public comment on a proposal to modernize Regulation O, the rule that governs when and how banks can extend credit to so-called insiders, including executives, board members, and major shareholders who could influence lending decisions.

The Fed said Regulation O has not been comprehensively updated since 1979, and that the proposal would refresh the dollar-based thresholds used in the rule while maintaining safeguards designed to prevent preferential treatment.

According to the central bank, the update would also address issues such as unnecessary coverage for passive interests held by companies through investment funds, codify statutory requirements, incorporate longstanding regulatory interpretations, and simplify how the rule is applied.

The Fed did not change the overall safeguard intent, but said the revised standards are intended to support community banks that often rely on local business leaders for board and executive roles. Comments are due 60 days after the proposal is published in the Federal Register, and Vice Chair for Supervision Michelle W. Bowman said the changes aim to keep the thresholds relevant while preserving conflict-of-interest protections.

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