On Dec. 27, FDIC, OCC, Fed issued guide on loans to shareholders.
Agencies issued enforcement relief from Reg O, to a bank and its Principal shareholder fund complex (PSFC), if bank lends/extends credit to its PSFC under certain conditions.
Reg O Lending Limitations
Credit extension by banks to principal shareholders(PS) and other insiders are limited.
A fund complex, upon acquiring more than 10% of a class of voting securities of a banking organization, would be considered principal shareholder for Reg O purposes.
Lending to PS is subject to strict lending limits, other restrictions/standards per Reg O.
Lending Limitation Relief
Agencies gave banks temporary flexibility to lend to PSFC that meet eligibility criteria.
Requires PSFC does not control 15% or more of any class of voting securities of bank.
PSFC doesn't have or seek a representative to serve as bank officer, agent, employee.
Does not exercise (or try to), controlling influence over bank management or policies.
Bank does not knowingly lend to PSFC, unless the terms of such extension of credit are substantially the same, as those for comparable loans with unaffiliated 3rd-parties.
Lending not involve more than normal risk of repayment or other unfavorable features.
Relief Rationale
Banks indicated application of Reg O to PSFC can lead to sudden, disruptive unwinding of substantial pre-existing lending relationships; reduce credit availability to many.
Effectiveness
Relief effective until Jan. 1, 2021, unless amended, extended, or superseded before.
Dec. 2020 Agencies Extended Relief
On Dec. 22, 2020, FDIC, OCC, Fed extended expiration of the relief, until Jan. 1, 2022.
Continue relief for asset managers, banks re credit extension that would violate Reg O.
Provided certain conditions satisfied to ensure asset manager does not control bank.
Also continue relief for banks for failure to report credit extensions as per 12 CFR 363.
Dec. 2021 Agencies Continued Relief
On Dec. 17, 2021, Fed, FDIC, OCC issued revised statement to extend expiring relief.
Said agencies will continue to discretionally not take action against banks or certain asset managers who become principal shareholders for certain credit extensions.
Credit extensions that would otherwise violate Regulation O, under 12 CFR 215.
Ceases effect earlier of Jan. 1, 2023 or effective date of final Fed rule to revise Reg O.
Dec. 2022 Agencies No-Action Relief Extension
On Dec. 22, 2022, Fed, FDIC, OCC extended no-action relief until Jan. 1, 2024, or the effective date of a final rule to revise Reg O fund complex/bank insider provisions.
Covers no-action relief for extensions of credit to fund complex-controlled portfolio companies and not extensions of credit to principal shareholder fund complexes.
The expiring relief extension supersedes and rescinds Dec. 17, 2021 communication.
Dec. 2023 Agencies No-Action Relief Extension
On Dec. 15, 2023, Agencies extended no-action relief until sooner of Jan. 1, 2025, or the effective date of a final rule to revise Reg O; rescinds FIL 55-2022 of Dec. 2022.
Dec. 15, 2023 Fed Relief Extension
On Dec. 15, 2023, Fed issued interagency statement SR 23-10 on the relief extension.
Document dated Dec. 15, 2023, was received on Jan. 8 due to a fixed feed.
