Skip to content
BOL Conferences
Thread Options
#1704396 - 05/30/12 03:06 PM Reg O Question
RR Sarah Offline
Power Poster
RR Sarah
Joined: Mar 2004
Posts: 2,505
Up North
One of our Executive Officers has ownership in another bank. Our bank is considering becoming involved in some purchase participations with the bank the EO has ownership in. Are we looking at a Reg O issue here? I'm confused and the more I read the more confused I become. Any help would be greatly appreciated.
_________________________
Sometimes you have to burn a few bridges to keep the crazies from following you.

Return to Top
Lending Compliance
#1704431 - 05/30/12 03:42 PM Re: Reg O Question RR Sarah
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
I'll take a stab.

What is an extension of credit?

(e) A participation without recourse is considered to be an extension of credit by the participating bank, not by the originating bank.

How is the participation structured...with or without recourse? Probably without.

If so, then I would say that he is limited to what your bank can hold based on your size.

(4) For any other purpose not specified in paragraphs (c)(1) through (c)(3) of this section, if the aggregate amount of extensions of credit to that executive officer under this paragraph does not exceed at any one time the higher of 2.5 per cent of the bank's unimpaired capital and unimpaired surplus or $25,000, but in no event more than $100,000.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#1704455 - 05/30/12 04:07 PM Re: Reg O Question RR Joker
RR Sarah Offline
Power Poster
RR Sarah
Joined: Mar 2004
Posts: 2,505
Up North
So bear with me because apparently I'm not firing on all cylinders today.

When we purchase a participation in a credit from another bank our agreement is with the bank, correct? So, if the participation purchased is without recourse and our EO is a principal shareholder in the lead bank, this could be considered an extension of credit to our EO? And the limits on lending to an EO would apply?
_________________________
Sometimes you have to burn a few bridges to keep the crazies from following you.

Return to Top
#1704475 - 05/30/12 04:30 PM Re: Reg O Question RR Sarah
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
It wouldn't even matter about his PS status at the other bank...your bank is held to the EO limits, regardless, based on how I read it.

IOW, if my bank particpated a loan to your bank on that EO...you would be held to the max ext limits.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#1704548 - 05/30/12 05:52 PM Re: Reg O Question RR Joker
RR Sarah Offline
Power Poster
RR Sarah
Joined: Mar 2004
Posts: 2,505
Up North
The loan wouldn't be to the EO or any business he had ownership in. I believe one deal they are talking about is a construction loan to a customer that exceeds the other banks lending limit.
_________________________
Sometimes you have to burn a few bridges to keep the crazies from following you.

Return to Top
#1704560 - 05/30/12 06:05 PM Re: Reg O Question RR Sarah
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
I don't recognize a Reg O issue there...I thought you meant loans to your EO...sorry!

I would look at conflict of interest, S&S and those types of issues.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top

Moderator:  Andy_Z