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Reg O Preapproval by Majority of Board

I have a question on Reg O, specifically the preapproval by the majority of the entire board of directors requirement under 215.4. 1. If the board of Directors authorizes a sub-committee to act on behalf of the entire board, would pre-approval by that sub-committee satisfy the regulatory requirement regarding approval by a majority of the entire Board of Directors? 2. What if the majority of that sub-committee was composed of senior management, the remaining minority members were board members and the total number of board members on the committee did not constitute a majority of the entire board?

by Dan Persfull:

215.4 is very specific the credit has to be approved by a majority of the entire board of directors of the bank. There is no allowance in 215.4 for that approval process to be delegated to a committee.


by Randy Carey:

That is correct. The presentation, review, discussion and approval of the loan must be sufficiently documented in the Board of Director's minutes of the board meeting. This allows for documentation of any dissenting votes by various board members. Bank failures many times are specifically related to insider abuse and board members can incur personal liability for the mismanagement of the bank. You don't just get a majority of the board in a room to vote yes on insider loans. There is a reason that the specific words "entire board of directors" is used in the regulation.

First published on 06/23/2019

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