Does anyone have any suggestions on how to audit for Regulation O compliance? Thanks.

a couple ideas... get copies of the forms directors and exec officers filed for their debt to other banks (cant remember the name of the form off-hand) which shoudl be filed annually. research any transactions with affiliates/correspondents and see if they are appropriate according to reg o and w. check board minutes to see that loans to exec officers have been approved, check outstanding balance of all loans to exec officers to see that it is ok... just a few ideas really quick

Are you an OCC bank? If so, download a copy of the Comptroller's Handbook on Insider Activies (March 2006). I found this extremely helpful.

The Comptroller's Handbook was very helpful. You also need to look at all personal DDA accounts of directors and executive officers for any overdrafts for the entire period (or audit period). Previously, I did a Reg O audit every year in February or March for the previous year. This year I am doing it quarterly.

We are a FDIC bank. Thanks for the responses. Although we are not an OCC bank, I am going to look at the Comptroller's Handbook for some guidance.

Make sure you check for preferential treatment on loans, check for the demand feature in the note (required for Executive Officers). If their loans need to be board approved check you board minutes. I also look at shareholder info at this time. Stock certificates procedures and account for issued and redeemed. May be a step too far for Reg O but a good time for me to do it. Hope this helps.

Reg O 215.5(d)(4) says, "(4) Made subject to the condition in writing that the extension of credit will, at the option of the member bank, become due and payable at any time that the officer is indebted to any other bank or banks in an aggregate amount greater than the amount specified for a category of credit in paragraph (c) of this section."

I located an FDIC advisory stating the following:

Section 22(g) of the Federal Reserve Act Requires "Due and Payable Upon Demand" Clause in Any Loan Made to an Executive Officer Regardless of Purpose of Loan

SEC. 22
(g) LOANS TO EXECUTIVE OFFICERS OF BANKS.--
(1) General Prohibition: Authorization for Extension of Credit; Conditions for Credit--Except as authorized under this section, no member bank may extend credit in any manner to any of its own executive officers. No executive officer of any member bank may become indebted to that member bank except by means of an extension of credit which the bank is authorized to make under this section. Any extension of credit under this section shall be promptly reported to the board of directors of the bank, and may be made only if--
(A) the bank would be authorized to make it to borrowers other than its officers;
(B) it is on terms not more favorable than those afforded other borrowers;
(C) the officer has submitted a detailed current financial statement; and
(D) it is on condition that it shall become due and payable on demand of the bank at any time when the officer is indebted to any other bank or banks on account of extensions of credit of any one of the three categories respectively referred to in paragraphs (2), (3), and (4) in any aggregate amount greater than the amount of credit of the same category that could be extended to him by the bank of which he is an officer.

Hope that helps.


I also ensure that the CALL Report properly reflects insider lending; Overdrafts; Code of Ethics/Code of Conduct are consitent with Designated Insider Laws; Recalculate the bank's lending limits to ensure that lending to insiders does not exceed the institution's unimpaired capital and surplus; credit approval by board, in advance; director abstaining from participating in voting for loan which he/she may have an interest; ensure terms of loans are consistent with similarly situated loans; etc.

Thanks, Tennismom and Lestie G!