Are loan modifications considered extensions of credit under Reg O?

I don't see where they are, but would like another opinion.

The mods are done to reduce an interest rate and payment. There is no new money extended, nor is the term extended.

These are available to all employees of the bank.

I would say these modifications are not extensions of credit. Obviously, the original loan would have been (if made to an insider).

I would look to 226.20 for part of your answer and to the intent of Reg. O, namely preferential treatment. Ensure any modifications are for all borrowers or qualify as an employment benefit and are available to and used by more than just your insiders.

I agree with Andy - you need to look at the intent of Reg O here, especially the provisions in 215.43 regarding extending credit on substantially the same terms "including interest rates and collateral" as those offered to noninsiders.

The fact that all employees are eligible for modifications is less important than the fact that the rate to which the loan is modified is either one offered to noninsiders. As an alternative, the rate could be one established under an employee benefit program for which all employees are eligible.

Fianlly, remember that Reg O is probably the most sensitive regulation for compliance. Anecdotal evidence from the supervisory agencies indicates that insider abuse is a factor in 75% of institution failures. The regulators are not going to tolerate insider preferential treatment, because they see it as an indicator of a troubled bank.

You would be well served to apply the Reg O standards and requirements to modifications, even though it would appear that the definition of an extension of credit may not cover modifications. I think your regulator would consider a modification the "making or renewal" of a loan.