The latest twist at my bank for getting around Reg O is to have the Board approve a loan "pending participation". I check to make sure the increase isn't funded, but is this practice OK?

I am thinking the participation should be in place before it is presented to the board for approval.

I'm not sure how this is circumventing Reg O as presented.

The loan is being approved by the board subject to certain conditions, one of which is the loan has to have a take out commitment by being sold upon consummation. As long as the take out commitment condition is met before the consummation then I don't see a problem.

OK.

Agree with Dan...the participated portion should never be funded, for even a day, on your bank's books.

Thanks - and I am not being argumentative, but I am wondering if it is the normal practice for your Board to approve a loan without the participant being in place. From your responses, I am guessing yes, but to me, this seems counter to the regulation in that, the insider is now aware (once he reads the minutes) he is getting the money and there will be a partcipant involved.

Is knowledge of the approval akin to a binding commitment?

I have seen it done this way, but it needs to be very clear that the loan is conditioned upon an acceptable participant and cannot be funded without that completely in place.

Knowledge of the approval is not akin to a binding commitment, as knowledge should include the condition of a participant. No participant, no loan.

OK - thanks all!