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Question & Answer
Question:In a previous issue, you explained that a director provided professional expertise - in this case medical practice - to loan decisions on applications from members of the same or similar profession. What about situations where the director does more than provide expert information but actually helps to evaluate the applicant's qualifications and participates in the loan decision?
Answer: The bank selects directors to help solicit business and to provide information about businesses and the community. Thus, you want to be able to ask directors for advice in areas of their expertise. However, for purposes of Regulation O, it can make a difference if the director merely provides help in evaluating and applicant's business plan and expertise, or actually participates in making the loan decision.
If the director participates in making the decision, the director may actually meet the definition of executive officer. That raises some additional questions under Regulation O. Examiners have been known to look closely at this one, so if your directors provide this sort of expertise, be careful.
Copyright © 1998 Compliance Action. Originally appeared in Compliance Action, Vol. 3, No. 4, 3/98
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