My FI doesn't extend loans to insiders, executive officers, or principal shareholders. We are being asked to create a Reg O Policy by audit but I don't see the need to. The Board's direction is no credit will be extended to Reg O applicants. Do we really need a policy for something like this? What would it even say besides The Bank doesn't extend credit to insiders, executive officers, or principal shareholders?

Do your Reg O Officers have deposit accounts? Reg O doesn't only cover loans, there are deposit (i.e. overdraft) regulations also.

They do have deposit accounts but I don't believe we extend overdraft protections the insiders, etc.

Just because an auditor says you need to do something does not automatically mean you have to do it. If management wants to comply just place something in your Loan Policy stating the bank does not make Reg. O loans. Remember you are just pushing these people to your competition.

Whether you extend overdraft protection or not - would you pay an overdraft for a Reg O officer if inclearing items exceeded their balance?

That's a good question Skittles. Let me confirm this. If the answer is yes, do we need Regulation O Policy in your opinion?

I think you need something outlining your procedures in this event. A short policy should work.

Also - do you do employee loans? Could there ever be a time where an employee has a loan with your financial institution and is then promoted to a Reg O Officer? While that loan (if memory serves) wouldn't be subject to the restrictions, what about a renewal or refinance (depending on the loan type) later.

Just thoughts to consider.

A good points. Thank you.