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#2199735 - 12/04/18 02:53 PM Reg O
Dog Lady Offline
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Joined: Dec 2015
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We have a Director who owns Business A more than 25%. Client is also an owner (not quite 25%) of Business A. Business A is 10% owner of Business B.

1) We have a loan to Director which is guaranteed by Business A. This is certainly subject to Reg O.
2) We have 2 loans to Business B. We have said these are subject to Reg O.
3) We also have a loan to Client which is guaranteed by Business A. I assume this is subject to Reg O as well because of Director's ownership in Business A.

Are these determinations accurate?

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Audit
#2199741 - 12/04/18 03:34 PM Re: Reg O Dog Lady
rlcarey Offline
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rlcarey
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Galveston, TX
1 & 3 definitely. 2 - that is being conservative.
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#2199760 - 12/04/18 05:24 PM Re: Reg O Dog Lady
Dog Lady Offline
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Joined: Dec 2015
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Thanks rclarey.

I'm auditing and thought 2 was potentially not Reg O depending on other details of the file (e.g. if our Director exercised some sort of control over Business B). Of course, they chose the safe route, so no problem there, other than potential staff education concerns. 3 had not been labeled a Reg O loan, but I definitely thought it should be. Glad to hear an educated evaluation that agrees with both of my reactions.
Last edited by Dog Lady; 12/04/18 05:25 PM.
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#2200025 - 12/06/18 07:30 PM Re: Reg O Dog Lady
Dog Lady Offline
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Let's complicate #2 above further.
Business A is, by definition, an insider.
If Business A guarantees credit for Business B, it's a credit extension (regardless of ownership). So obviously that credit has to be on included in Business A's 15% maximum. If it occurred, would a reduced rate on this loan represent a violation simply because Business A, an insider, is a guarantor, even though their ownership % does not make them a primary owner?

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#2200027 - 12/06/18 07:35 PM Re: Reg O Dog Lady
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 78,965
Galveston, TX
Depends on why the rate was reduced and whether or not you have comparable loans to other borrowers. Otherwise, it is going to be a real hard sell to say the rate was not reduced because the insider's related interest guaranteed the loan.
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