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#43615 - 11/18/02 05:33 PM Reg. O Question
RGS Offline
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I have a silly Reg O question. I have read the reg a few times and never remember seeing reference to anything but extensions of credit for insiders, but does Reg O give any guidance about safe-deposit boxes?

At my institution we are discussing the process for renting safe-deposit boxes to insiders. I'm of the opinion that Reg O doesn't really care about these, but another line of thought is that the spirit of Reg O is that insiders are treated the same as other customers/employees for all transactions (not just credit transactions).

Thanks for any input.
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#43616 - 11/18/02 06:09 PM Re: Reg. O Question
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Reg O:Purpose and scope. This subpart A governs any extension of credit by a member bank to an executive officer, director, or principal shareholder of.

Reg O has nothing to do with the renting of a safe deposit box, or waiving a fee for an insider - it's done all the time.

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#43617 - 11/18/02 06:13 PM Re: Reg. O Question
Andy_Z Offline
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Reg O addresses loans and 12 USC 376 addresses deposit interest rates, but I know of nothing prohibiting preferential treatment for SD boxes.
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#43618 - 11/18/02 06:25 PM Re: Reg. O Question
RGS Offline
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Thank you very much Andy and Grist. I didn't think there was anything out there, but I didn't know if I wasn't aware of something from an interpretive letter, etc.
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#43619 - 11/18/02 07:37 PM Re: Reg. O Question
Princess Romeo Offline

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It's helpful to think about why we have Reg O. A while back, some greedy folks took advantage of their position as bank insiders, and made themselves "sweetheart" deal loans that were very speculative, or were just out-and-out fraudulent loans.

These loans were not small by any means, and contributed to the failure of the bank.

Don't know that the renting of a safe deposit box could jeopardize the Safety and Soundness of the Bank.

I suppose you could make an extreme example of an insider taking up all of the bank's Safe Deposit Boxes for free, and that could be a money-loser for the bank, but what are the odds?
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#43620 - 11/18/02 09:31 PM Re: Reg. O Question
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You would do well to check Section 23A and B of the Fed. Transactions with affiliates must be "fair to, and in the best interest of the bank". This is a pretty high standard to live by. Preferential loans to employees and affiliates are OK if it is offered to everyone on an equal basis. So it would seem you must find some group of customers you would offer the box to at no cost and equate the directors to this group. Such as the bank's best customers. Of course examiners can always take a contrary opinion of the facts and circumstances, just like they do in legal lending limit questions.
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#43621 - 11/18/02 10:13 PM Re: Reg. O Question
RGS Offline
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We offer our smallest lock boxes free of charge to employees. Some directors get this deal, others don't. I really think the question has come up because an insider wants another "free" SD box. Then there is the thought that "X" has a big SD box free, buy "Y" has a small SD box free. As an aside, I think it's pretty sad that someone with the $$$ necessary to be a director would try to nickel and dime everything out of the institution, but that's just my opinion.
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