Spouse of an Executive Officer of the Bank applies for a loan in their name only. The collateral of the loan would be a Certificate of Deposit that is in the name of the spouse's only. The proceeds of the loan will go towards vacation that the spouse will take with the spouse's family.

Executive Officer is not a Borrower, not a owner of the collateral and will not go on vacation with their spouse.

Does Regulation O apply on the spouse?

The spouse is not a shareholder.

Community property state?? So, you are going to make the argument that this loan to the spouse in no way benefits the EO? Would he pay for the vacation otherwise? How is "the spouse" going to make the payments?

Very grey area.

Not a community property state. The wife has a job, so I believe she would repay the loan from the income she made there.

When in doubt code the loan as Regulation O and follow Regulation O guidelines?