Are any of you still tracking indebtedness to corespondent banks since FIL-108-2006 did away with that requirement? In our most recent Reg O audit, our auditors recommended that we still continue to implement a process to track indebtedness to correspondent banks even though no longer a regulatory requirement....I'm not sure what the benefit is and if anyone else is doing this, what format are you using and what are you doing with this information?

There are three things that come into play.

1. You cannot make a preferential loan to an insider or related interest of a correspondent bank.
2.You cannot open a correspondent account if that bank has a preferential loan to one of your insiders or related interests.
3. You cannot open a correspondent account if you have a preferential loan to one of their insiders or related interests.

12 USC 1972(2)

So, if you make preferential loans to anyone, you should be asking them if they are an insider of a correspondent bank or other bank. If you have such loans, it is probably a good idea to have them identified.

If you plan on opening a new correspondent bank account, you should poll your insiders to see if there are any relationships prior to opening the account.

Once the account is open, it would be your correspondent bank's issue if they granted a new loan to one of your insiders, although training your insiders on these prohibitions is probably a good idea.

On those same lines, we still require our insiders to report annually. I do have a question however. We have a new executive that was not employed by our bank in 2008. We have asked that all executives report indebtedness to a correspondent bank for year end 2008. In my opinion, I think the executive should report as they are an executive in 2009 and we should have this information.

the executive happens to have a loan with one of our correspondent banks. I don't know the terms of the loan--therefore the request for reporting. I would like to say that the bank's insiders are never allowed to have a preferential loan with a correspondent and therefore, the executive should report regardless of whether they were here in 2008.

Please let me know if I'm on the right track.

Thanks!

If the loan was made prior to the appointment, it would be grandfathered under any previous terms negotiated. However, if it is later renewed, etc., then it would fall under the restrictions.