Fed Proposes Updates to Bank Insider Loan Rules
Published Date: 8/4/2026
Proposed Rule
Summary
The Board is inviting public comment on proposed amendments to Regulation O, which governs loans by member banks to their insiders and insiders of their affiliates. The proposed amendments would update and modernize the regulation, increase transparency by clarifying requirements and incorporating existing interpretations, and promote efficiency by reducing regulatory burden. The proposed amendments also would incorporate existing statutory requirements that are not currently reflected in the regulation. Moreover, the proposed amendments would update several outdated dollar-based thresholds in Regulation O and index these thresholds going forward. In addition, the proposed amendments would address the application of Regulation O to member banks that lend to companies that are presumed to be controlled by large asset management companies through passive investment funds. Finally, the proposed amendments would revise and reorganize the regulation to streamline the text and make it more accessible.
Analyzed Economic Effects
5 provisions identified: 4 benefits, 1 costs, 0 mixed.
Dollar Thresholds Raised Sharply
The Board would raise several dollar-based thresholds in Regulation O: the credit card exemption from $15,000 to $60,000; overdraft-with-credit-plan exemption from $5,000 to $20,000; inadvertent overdraft exception from $1,000 to $4,000; the ‘‘other purpose’’ exception for executive officer loans from $100,000 to $400,000; and the board prior-approval and public disclosure thresholds from $500,000 to $2,000,000.
Streamlined Executive Loan Limits
The proposal would simplify limits on non‑mortgage/non‑education loans to executive officers so that such loans may be made up to the lesser of 2.5 percent of the bank's unimpaired capital and unimpaired surplus or $400,000. It would also require prior board approval when aggregated extensions to an insider exceed the lesser of 5 percent of unimpaired capital and unimpaired surplus or $2,000,000.
Five-Year GDP Indexing Rule
The proposal would automatically adjust the dollar-based thresholds every five years based on five-year cumulative nominal U.S. GDP growth (using Bureau of Economic Analysis estimates) and publish new thresholds in the Federal Register. The Board would not lower thresholds if the five-year cumulative nominal GDP growth is negative; thresholds are rounded to simple figures.
Relief for Passive Fund Portfolio Companies
The Board would exclude portfolio companies of qualifying passive fund complexes from the Regulation O presumption that those companies are related interests of a principal shareholder fund complex. This relief would apply when the fund complex demonstrates passive investment qualities (e.g., index funds).
Aggregate Counting of Exceptions
The proposed rule clarifies that dollar limits for exceptions (for example, credit-card exceptions and overdraft exceptions) apply to the aggregate of all such extensions of credit to the same insider when determining whether the dollar-based limit is met.
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Key Dates
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