On July 31, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) released a notice of proposed rulemaking (the “Federal Reserve Proposal”) to “modernize” Regulation O, which governs loans by member banks to their insiders (directors, certain officers and principal shareholders) and insiders of their affiliates.[1] It would be the first comprehensive update to Regulation O since 1979. In addition, the FDIC proposed revisions to its rules governing extensions of credit to insiders of FDIC-supervised institutions (the “FDIC Proposal”).[2]
The Federal Reserve Proposal would, among other changes:
- update and significantly increase “outdated” dollar-based limits on lending to insiders and index these limits based on nominal GDP going forward;
- exempt portfolio companies of companies that sponsor, manage and advise investment funds[3] from Regulation O’s presumption of control, if the fund complexes meet proposed eligibility requirements;
- update Regulation O’s definition of “extension of credit” to (i) expand the “non-exhaustive list of transactions” that constitute extensions of credit to include credit exposures arising from derivative transactions (including specified derivative transactions with nonaffiliates involving securities issued by an insider) and securities financing transactions pursuant to section 614 of the Dodd-Frank Act[4] and (ii) establish valuation methodologies for valuing such credit exposures, with the Federal Reserve noting that it is considering whether to use the same methodologies for purposes of section 23A of the Federal Reserve Act and Regulation W;
- include requirements imposed by the Dodd-Frank Act regarding the purchase or sale of an asset between an insider and a bank; and
- make other technical amendments, including importing certain defined terms into Regulation O from the Federal Reserve’s Regulation Y.
The FDIC Proposal would align certain thresholds under the FDIC’s rules governing extensions of credit to insiders with those included in the Federal Reserve Proposal, and would use the same methodology to update the thresholds going forward.
The Federal Reserve Proposal would constitute a significant, comprehensive update of Regulation O that would seek to account for economic growth and inflation, as well as changes to the investment landscape since 1979, and is responsive to several years of calls from external stakeholders, particularly community banks, for the rule to be updated. If adopted, the Federal Reserve Proposal would ease certain restrictions on extensions of credit by significantly increasing various dollar-based thresholds. The Federal Reserve expects that this change would reduce burdens on banks and their insiders, and may have particularly significant effects for community banks where bank directors “typically are active business persons whose businesses have credit requirements.”[5] The Federal Reserve Proposal would also provide banks with the certainty of permanent relief with respect to extensions of credit to certain portfolio companies of “Qualified Fund Complexes.” Finally, the Federal Reserve Proposal’s approach to valuing certain extensions of credit, including credit exposures arising from derivative transactions, may signal that similar changes could be made to Regulation W in the future.
The Federal Reserve requests comment on all aspects of its proposal, including on 102 specific questions. Comments on the Federal Reserve Proposal are due on October 5, 2026. A redline of the Federal Reserve Proposal against the current text of Regulation O is available here.
The FDIC requests comment on all aspects of its proposal, including on five specific questions. Comments on the FDIC Proposal are due on October 5, 2026. A redline of the FDIC Proposal against the current text of 12 C.F.R. part 337 is available here.
Background
As a result of concerns about bank insiders’ ability to engage in self-dealing by influencing banks’ lending decisions, Congress in 1933 and 1978 adopted restrictions on extensions of credit to insiders, codified in sections 22(h) and 22(g) of the Federal Reserve Act. Section 22(h) limits the amount and terms of extensions of credit from banks to their “insiders.”[6] Insiders include executive officers, directors and principal shareholders, as well as “related interests” of such persons, which term includes any company or political or campaign committee “controlled” by such persons. Section 22(g) of the Federal Reserve Act imposes additional limitations on extensions of credit made by banks to their executive officers.[7]
The Federal Reserve implements sections 22(g) and 22(h) for national and state member banks through Regulation O.[8]Federally insured state nonmember banks, insured savings associations and national banks are also generally subject to Regulation O, as enforced by their appropriate Federal banking agency.[9] Regulation O (i) limits the quantity of credit that a bank may extend to insiders, (ii) requires extensions of credit by a bank to insiders to be on terms that the bank would offer to third parties, (iii) requires that certain large extensions of credit to insiders be approved by the bank’s board of directors and (iv) requires banks to maintain records documenting their compliance with Regulation O’s restrictions and make certain disclosures concerning extensions of credit subject to Regulation O. Regulation O includes certain exceptions to its requirements, including for extensions of credit below certain dollar-based thresholds. The most recent updates to any of these dollar-based thresholds occurred in 1994.
Proposed Revisions to Regulation O
Changes to Dollar-Based Thresholds Applicable to Extensions of Credit to Insiders
The Federal Reserve Proposal includes major changes to Regulation O’s dollar-based thresholds applicable to extensions of credit to insiders, which the Federal Reserve Proposal describes as currently “obsolete” due to economic growth and inflation since 1994. The Federal Reserve Proposal would adjust these thresholds based on changes in nominal GDP since 1994, resulting in each threshold increasing by a multiple of four. The Federal Reserve Proposal would index the thresholds every five years going forward based on cumulative growth in nominal GDP, allowing the thresholds to stay proportionate with future economic growth and inflation without the need for additional rulemaking.[10]
The Federal Reserve Proposal includes the following proposed revisions, with the FDIC Proposal making certain conforming changes, as noted below:
- Exceptions to Restrictions on Extensions of Credit. Regulation O’s restrictions on extensions of credit to insiders are subject to specified exceptions, including in relation to credit card debt and indebtedness as a result of certain interest-bearing overdraft credit plans.[11]
- Credit Card Debt. The Federal Reserve Proposal would increase the amount of credit card debt exempt from restrictions on extensions of credit from $15,000 to $60,000.[12]
- Interest-Bearing Overdraft Credit Plans. The Federal Reserve Proposal would increase the amount of indebtedness arising from certain interest-bearing overdraft credit plans exempt from restrictions on extensions of credit from $5,000 to $20,000.[13]
- Inadvertent Overdrafts Exemption. Regulation O generally prohibits a bank from paying an overdraft on an account of an executive officer or director of the bank or any of its affiliates but provides an exception for inadvertent overdrafts up to a certain amount, subject to certain conditions.[14] The Federal Reserve Proposal would increase this threshold from $1,000 to $4,000.[15]
- Extensions of Credit Requiring Prior Board Approval. Regulation O prohibits a bank from extending credit to any insider of the bank or its affiliates in an amount that, when aggregated with all other extensions of credit to that insider and to all related interests of that insider, exceeds the lesser of (i) $500,000 and (ii) the greater of $25,000 and 5 percent of the bank’s unimpaired capital and unimpaired surplus, unless the bank obtains the approval of a majority of the entire board of directors, with the interested party abstaining from the approval.[16] Under the Federal Reserve Proposal, the fixed-dollar ceiling would be increased from $500,000 to $2,000,000 and the $25,000 figure would be removed.[17] The FDIC Proposal would make a conforming change to the FDIC’s thresholds.[18]
- Special Prohibitions for Executive Officers. Regulation O includes additional prohibitions on extensions of credit to executive officers, but allows banks to extend credit to executive officers for specified purposes, including to finance their children’s education, to finance the purchase of their residence or “[f]or any other purpose” if the “aggregate amount of the extensions of credit to the executive officer . . . does not exceed the higher of 2.5 [percent] of the bank’s unimpaired capital and unimpaired surplus or $25,000, but in no event more than $100,000.”[19] The Federal Reserve Proposal would remove the $25,000 figure and increase the upper limit on this “other purpose” exception from $100,000 to $400,000.[20] The FDIC Proposal would make a conforming change to the FDIC’s threshold.[21]
- Public Disclosure of Loans. Upon receipt of a written request from a member of the public, a bank must disclose the names of each of its executive officers and principal shareholders to whom, or to whose related interests, the bank has aggregate outstanding extensions of credit that equal or exceed the lesser of (i) 5 percent of the bank’s unimpaired capital and unimpaired surplus (subject to a $25,000 de minimis exception) and (ii) $500,000.[22] Under the Federal Reserve Proposal, the fixed-dollar threshold for public disclosure of these extensions of credit would be increased from $500,000 to $2,000,000.[23]
Portfolio Companies of Fund Complexes
Background
The Federal Reserve Proposal seeks to address, on a permanent basis, the “unnecessarily burdensome evolution in [Regulation O’s] scope”[24] that had led the banking agencies to provide interim relief under a joint statement issued by the Federal Reserve, FDIC and OCC in 2019 (the “Joint Statement”) to address concerns about the application of Regulation O to passive investment funds and the companies that sponsor, manage and advise them (“Fund Complexes”) due to Regulation O’s definitions of “principal shareholder” and “related interests.”[25] Principal shareholders of a bank are defined as those who own, control or have the power to vote more than 10 percent of a class of voting securities of the bank.[26] When a Fund Complex exceeds the threshold with respect to banks, the Fund Complex may become a principal shareholder of the banks. Related interests of those principal shareholders include companies that the principal shareholders control, with control presumed at 10 percent ownership of a company’s class of voting securities if no other person owns, controls or has the power to vote a greater percentage of that class of securities than the principal shareholder (the “Presumption of Control”).[27] When a Fund Complex exceeds the threshold with respect to non-bank companies (assuming the Fund Complex is the largest shareholder of the non-bank companies), the non-bank companies become related interests of the Fund Complex, the principal shareholder.
Because of the increased popularity of passive investing through index funds, Fund Complexes have acquired, or have approached acquiring, more than 10 percent of a class of voting securities of a wide range of public companies, including bank and non-bank companies. Federal Reserve research indicates that, as of the fourth quarter of 2025, “[F]und [C]omplexes are principal shareholders of approximately 66 banks, and [F]und [C]omplexes might be presumed to control approximately 2047 portfolio companies.”[28]
The Joint Statement addressed concerns about the potentially overbroad application of Regulation O by allowing banks with passive Fund Complexes as principal shareholders to continue to lend to portfolio companies “controlled” by the Fund Complexes, subject to certain conditions, while the agencies considered how to address the issue on a permanent basis.[29]
The Federal Reserve’s Proposed Relief
The Federal Reserve Proposal notes that it “is highly unlikely that Congress foresaw or intended for section 22(h) to apply to extensions of credit to portfolio companies of passive [Fund Complexes] or the heavy compliance burden that this would create based on [Regulation O’s Presumption of Control], which is not in the statute” and that the self-dealing concerns underlying section 22(h) and Regulation O “are not implicated when [Fund Complexes] offer investment funds that acquire ownership in a wide array of publicly traded companies . . . based primarily on tracking third-party broad-based market indices.”[30]
Under the Federal Reserve Proposal, Fund Complexes that are principal shareholders of banks would continue to be considered insiders subject to Regulation O’s restrictions for purposes of lending by the bank to the Fund Complex itself. But Fund Complex portfolio companies would not be subject to the Presumption of Control. Lending by the bank to portfolio companies would therefore not be subject to Regulation O’s restrictions solely due to the Presumption of Control, as long as the Fund Complex meets the requirements of a Qualified Fund Complex. A Fund Complex would be considered a Qualified Fund Complex if (i) the Fund Complex “is not, and is not affiliated with, a bank holding company . . . or a savings and loan holding company” (together with insured depository institutions, “Regulated Companies”), (ii) no individual fund in the Fund Complex “owns or controls more than 10 percent of any class of voting securities” of a Regulated Company, (iii) funds in the Fund Complex that are not index funds do not “in the aggregate own or control more than 10 percent of any class of voting securities” of a Regulated Company and (iv) the Fund Complex “does not meet any of the conditions that would give rise to a rebuttable presumption of control” under Regulation Y over a Regulated Company.[31] A portfolio company would be considered a related interest of a Fund Complex if the Fund Complex were to hold 25 percent or more of any class of that portfolio company’s voting securities.
If a Fund Complex no longer meets one of these conditions, including if, among other things, the Fund Complex attempts to influence the lending decisions of any bank in its portfolio in favor of its other portfolio companies and the Federal Reserve finds the Fund Complex no longer meets the standard for a Qualified Fund Complex, all the Fund Complex’s portfolio companies “would immediately become related interests” and would therefore be insiders of each bank of which the Fund Complex is a principal shareholder. Any outstanding extensions of credit to the Fund Complex’s portfolio companies would count toward the bank’s Regulation O lending limits, all future extensions of credit would be subject to all of the requirements in Regulation O and the Fund Complex would be liable for knowingly permitting any of the portfolio companies to receive a future extension of credit from one of the banks.[32]
Although much of the Qualified Fund Complex standard is consistent with the existing relief under the Joint Statement, as updated most recently in 2025, one notable change is the Federal Reserve Proposal’s incorporation of the rebuttable presumptions of control from the Federal Reserve’s 2020 control rule in determining whether the Qualified Fund Complex test is met.[33] The standard would require the consideration of other control indicia, which include quantitative analysis of business relationships between the bank and the Fund Complex.[34]
Defining and Measuring “Extensions of Credit”
The Dodd-Frank Act amended the definition of an extension of credit under section 22(h) to include—in addition to making or renewing loans, granting a line of credit and entering similar transactions—“having credit exposure to [a] person arising from” enumerated transactions, including derivative transactions and securities financing transactions.[35] The Federal Reserve Proposal would set forth methodologies for valuing credit exposure arising from covered derivative transactions and securities financing transactions, including requiring banks to value such credit exposure for Regulation O purposes using any method that the bank is authorized to use under the applicable regulatory capital rule issued by its appropriate Federal banking agency.[36] In contrast, for purposes of section 23A and Regulation W, in 2020 the Federal Reserve stated that “bank-affiliate derivatives generally can be valued at the bank’s current exposure to the affiliate.”[37] Under the capital proposals released in March 2026 and consistent with the current capital rule, there would be two methods for valuing derivative exposures: the current exposure methodology and the standardized approach for counterparty credit risk.[38] Each capital proposal methodology would result in higher values than using the current credit exposure because it would include both current exposure and a measure of potential future changes in the exposure (referred to as “potential future exposure”). In the Federal Reserve Proposal, the Federal Reserve states that, given the similarities in the amendments in the Dodd-Frank Act with respect to derivatives and securities financing transactions to sections 22(h) and 23A, the Federal Reserve is “considering” whether any of the valuation methodologies proposed for Regulation O should also be used in the section 23A and Regulation W context.[39] The Federal Reserve adds that the adoption of any valuation methodology for section 23A and Regulation W purposes would occur in a separate rulemaking.
The Federal Reserve Proposal would include separate valuation principles with respect to specified types of derivatives that a bank enters into with a nonaffiliate that would be treated as functionally similar to a guarantee on behalf of an insider for Regulation O purposes, including credit derivatives, equity derivatives and total return swaps. For these derivatives, the credit exposure would be valued at the greater of the notional principal amount and the maximum potential loss to the bank on the transaction.
The Federal Reserve Proposal includes the following non-exhaustive list of derivatives between a bank and a nonaffiliate that would be considered extensions of credit to an insider for Regulation O purposes:
- An agreement under which the bank, in exchange for a fee, agrees to compensate the third party for any default of the underlying obligation of the insider;
- An agreement under which the bank, in exchange for payments based on the total return of the underlying obligation of the insider, agrees to pay the third party a spread over funding costs plus any depreciation in the value of the underlying obligation of the insider;
- An equity derivative under which the bank, in exchange for a fee, agrees to compensate a third party for any depreciation in the value of an equity security of the insider; and
- A total return swap, whether funded or unfunded, under which the bank, in exchange for a fee, agrees to compensate a third party for any loss or depreciation in the value of a security or debt obligation issued by an insider.[40]
The Federal Reserve Proposal would appear to subject to Regulation O ordinary-course, customer-driven equity derivative and credit derivative transactions that involve securities or debt obligations issued by an insider (which includes both principal shareholders and their related interests, subject to the proposed relief for portfolio companies of a Qualified Fund Complex discussed above).[41] The Federal Reserve Proposal would not appear to permit a bank to reduce its Regulation O credit exposure to reflect hedging activities for these customer-driven transactions with unaffiliated third parties.
In addition, the Federal Reserve Proposal would make certain changes to the definition of “extension of credit” that would align Regulation O’s definition more closely with that of Regulation W. These changes would include adding to Regulation O’s non-exhaustive list of transactions that fall within the definition of “extension of credit” certain new transaction types such as leases that are the “functional equivalent of an extension of credit” and an “increase in the amount of, extension of maturity of, or adjustment to the interest rate term or other material term of, an existing extension of credit to an insider.”[42]
Relying on Regulation W’s valuation principles, the Federal Reserve Proposal would also set forth principles for valuing other extensions of credit, including extensions of credit originated by a bank, acquired by a bank and through the purchase of or investment in a debt security.[43]
Application of Regulation O to Sale and Purchase Transactions Between a Bank and Its Insiders
The Federal Reserve Proposal would incorporate into Regulation O the requirements of section 615 of the Dodd-Frank Act prohibiting an insured depository institution from purchasing or selling an asset from or to an insider unless (i) the transaction is on “market terms” and (ii) if the transaction represents more than 10 percent of the capital stock and surplus of the institution, the transaction has been approved in advance by a majority of members of the board “who do not have an interest in the transaction.”[44] The Federal Reserve Proposal’s definition of a “purchase of asset” largely mirrors Regulation W’s definition.[45]
Additional Proposed Amendments
The Federal Reserve Proposal would make several other changes to Regulation O, including:
- Codifying the Federal Reserve’s practice of, with certain exceptions, treating extensions of credit to a spouse of an insider or to an estate or trust in which an insider has a substantial beneficial interest as having been made to the insider.[46]
- Revising the definition of “executive officer” by adding “chief executive officer,” “chief financial officer,” “chief lending officer” and “chief investment officer” and removing “every vice president,” “the cashier,” and “the secretary” from the list of titles that would presumptively render a person an executive officer.[47]
- Providing that the unused portion of an insider’s line of credit will be deemed fully secured, subject to certain conditions, for purposes of Regulation O’s individual lending limits. Those limits provide that a bank may not extend credit to an insider if the amount of the extension, when aggregated with all other extensions of credit to the insider and the insider’s related interests, exceeds (i) 15 percent of the bank’s unimpaired capital and unimpaired surplus for loans that are not fully secured and (ii) an additional 10 percent for loans fully secured by readily marketable collateral having a market value at least equal to the amount of the loan.[48]
- Adding Regulation Y’s definitions for certain terms that are used but not currently defined by Regulation O, including “acting in concert” and “class of voting securities.”[49]
- With respect to the exception under Regulation O that permits making extensions of credit to an executive officer when the extension of credit is secured by a first lien on a “residence” that is “owned by the executive officer,” clarifying that this exception applies to a “single” residence and only in cases where the executive officer lives in the property for at least three months each year and the property is not used for investment purposes.[50]
- Incorporating into the text of the rule certain already existing statutory requirements for restrictions on extensions of credit by banks to insiders of correspondent banks and by correspondent banks to insiders of their respondent banks.[51] The Federal Reserve Proposal would also include specific methods for banks to adequately maintain records for the correspondent lending restrictions because the relevant borrowers are insiders of an unaffiliated third party.[52]
- Codifying certain other elements of the Federal Reserve’s existing application of Regulation O, including: (i) specifying when Regulation O applies to extensions of credit made to a non-insider that later becomes an insider; (ii) adding rebuttable presumptions of control over trusts; (iii) applying to related interests of executive officers the restrictions on extensions of credit to executive officers, if the related interest is merely an alter ego of the executive officer and has no independent means to repay the extension of credit; (iv) clarifying that a person is not a principal shareholder of a bank or any of its affiliates if the bank is a subsidiary of such person; (v) clarifying that extensions of credit by a bank to its subsidiaries are not subject to Regulation O and extensions of credit by the subsidiaries would be treated as loans made by the bank; (vi) requiring all directors that are interested parties to abstain from participating in votes of a bank’s board of directors on whether to authorize the bank to engage in certain transactions with an insider; and (vii) providing a safe harbor for recordkeeping requirements related to insiders of a bank’s affiliates and to correspondent lending restrictions.
- “Updat[ing] and [s]treamlin[ing]” Regulation O by eliminating unnecessary cross-references and footnotes and reorganizing the regulation.[53]
ENDNOTES
[1] Federal Reserve, Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks; Bank Holding Companies, 91 Fed. Reg. 49526 (Aug. 4, 2026), available at https://www.federalregister.gov/documents/2026/08/04/2026-15777/loans-to-executive-officers-directors-and-principal-shareholders-of-member-banks-bank-holding [hereinafter, the “Federal Reserve Proposal”].
[2] FDIC, Extensions of Credit to Insiders, 91 Fed. Reg. 50730 (Aug. 6, 2026), available at https://www.federalregister.gov/documents/2026/08/06/2026-15995/extensions-of-credit-to-insiders [hereinafter, the “FDIC Proposal”]. Because the OCC’s regulations on lending to insiders incorporate the Federal Reserve’s regulations by reference, a corresponding proposal from the OCC is not needed. 12 C.F.R. § 31.2(a).
[3] For purposes of the Federal Reserve Proposal, investment fund means any investment company registered under the Investment Company Act of 1940, such as mutual funds and exchange traded funds, as well as collective investment trusts, separately managed institutional accounts and other pooled investment vehicles. Federal Reserve Proposal, at 49527, note 18.
[4] Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 614 (codified at 12 U.S.C. § 375b(9)(D)(i)(II)).
[5] Federal Reserve Proposal, at 49528.
[6] 12 U.S.C. § 375b.
[7] Id. § 375a.
[8] 12 C.F.R. part 215.
[9] See 12 U.S.C. § 1828(j); 12 U.S.C. § 1468(b); 12 C.F.R. § 337.3; 12 C.F.R. § 31.2.
[10] The Federal Reserve Proposal requests comment regarding whether the consumer price index would be a better metric than nominal GDP, and Governor Barr noted his particular interest in views on “whether the consumer price index would be [a] more appropriate” metric. Using the consumer price index would result in increases to the thresholds by approximately a multiple of two. See Federal Reserve Proposal, at 49529, 49553; Federal Reserve, Statement on the Proposal to Modernize the Regulation Governing Bank Lending to Bank Executives, Board Members and Major Shareholders by Governor Michael S. Barr (July 31, 2026), available at https://www.federalreserve.gov/newsevents/pressreleases/barr-statement-20260731b.htm. The Federal Reserve’s proposed adjustments to, and indexing of, dollar-based thresholds may set a precedent for the Federal Reserve to similarly update and index dollar-based thresholds in other regulations in the future.
[11] 12 C.F.R. § 215.3(b).
[12] Federal Reserve Proposal, Proposed § 215.3(b)(5).
[13] Id. Proposed § 215.3(b)(6).
[14] 12 C.F.R. § 215.4(e).
[15] Federal Reserve Proposal, Proposed § 215.21(b)(3)(iii).
[16] 12 C.F.R. § 215.4(b).
[17] Federal Reserve Proposal, Proposed § 215.12.
[18] FDIC Proposal, Proposed § 337.3(b). See 12 C.F.R. § 337.3(b).
[19] 12 C.F.R. § 215.5(c)(4).
[20] Federal Reserve Proposal, Proposed § 215.20(d)(4).
[21] FDIC Proposal, Proposed § 337.3(c)(2). See 12 C.F.R. § 337.3(c)(2).
[22] 12 C.F.R. § 215.9(b).
[23] Federal Reserve Proposal, Proposed § 215.31(a).
[24] Federal Reserve, Staff Memorandum, Proposed Rule to Modernize Regulation O (Bank Lending to Insiders), at 1 (June 30, 2026), available at https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20260731b1.pdf.
[25] See Federal Reserve, FDIC and OCC, Statement Regarding Status of Certain Investment Funds and Their Portfolio Investments for Purposes of Regulation O and Reporting Requirements under Part 363 of FDIC Regulations, at 1 (Dec. 27, 2019), available at https://www.fdic.gov/news/inactive-financial-institution-letters/2019/fil19085a.pdf (providing temporary no-action relief that would need to be renewed to remain in effect). See also Federal Reserve, SR 25-6: Status of Certain Investment Funds and their Portfolio Investments for Purposes of Regulation O and Reporting Requirements under Part 363 of FDIC Regulations (Dec. 19, 2025), available at https://www.federalreserve.gov/supervisionreg/srletters/SR2506.htm (providing that the Federal Reserve is renewing the Joint Statement’s relief through 2026); OCC and FDIC, OCC and FDIC Statement Regarding the Status of Certain Investment Funds and Their Portfolio Investments for Purposes of Insider Lending Restrictions and Related Reporting Requirements (Dec. 18, 2025), available at https://www.fdic.gov/occ-and-fdic-statement-regarding-status-certain-investment-funds-and-their-portfolio-investments [hereinafter, the “OCC-FDIC Statement”] (stating that the OCC and FDIC’s relief will no longer have an expiration date and therefore will not need to be renewed annually).
[26] 12 U.S.C. § 375b(9)(F)(i); 12 C.F.R. § 215.2(m)(1).
[27] 12 C.F.R. § 215.2(c)(2)(ii).
[28] Federal Reserve Proposal, at 49554.
[29] The Federal Reserve Proposal, if adopted, will likely mark the end of the FDIC and OCC’s reliance on the Joint Statement to provide relief. The FDIC and OCC previously indicated that they “anticipate that [their statement providing no-action relief] will no longer be necessary” when the Federal Reserve revises Regulation O to “fully address” the treatment of portfolio companies of Fund Complexes. OCC-FDIC Statement.
[30] Federal Reserve Proposal, at 49530, 49532.
[31] Id. Proposed § 215.2 (“Qualified fund complex”). See also 12 C.F.R. § 225.32.
[32] Federal Reserve Proposal, at 49532.
[33] See 12 C.F.R. § 225.32. This proposal may signal a shift in the Federal Reserve’s stance that Fund Complexes may continue to rely on previously issued non-control determinations despite regulatory changes. The Federal Reserve previously noted in its 2020 release revising Regulation Y’s control framework that “[a]t least one commenter recommended that the Board confirm the ongoing applicability of control letters from the General Counsel of the [Federal Reserve] to mutual fund families, and investments made in accordance with those letters. . . . [and that the Federal Reserve] does not intend to revisit existing structures that were previously reviewed by the Federal Reserve System and have not changed materially.” Federal Reserve, Final Rule, Control and Divestiture Proceedings, 85 Fed. Reg. 12398, 12409 (Mar. 2, 2020), available at https://www.federalregister.gov/documents/2020/03/02/2020-03398/control-and-divestiture-proceedings.
[34] The relevant indicia of control would depend on the Fund Complex’s amount of ownership or control of a class of voting securities of the bank, including indicia applicable to ownership or control of 10 percent to 14.99 percent, and indicia applicable to ownership or control of 15 percent to 24.99 percent, of any class of voting securities. 12 C.F.R. § 225.32(e), (f).
[35] Dodd-Frank Act § 614 (codified at 12 U.S.C. § 375b(9)(D)(i)). A “derivative transaction” would be defined to have the same meaning as that term has for purposes of lending limits applicable to national banks, which includes “any transaction that is a contract, agreement, swap, warrant, note, or option that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets.” 12 U.S.C. § 84(b)(3); Federal Reserve Proposal, Proposed § 215.2 (“Derivative transaction”). Securities financing transactions include securities borrowing or lending transactions, repurchase agreements and reverse repurchase agreements. Federal Reserve Proposal, at 49533.
[36] Federal Reserve Proposal, Proposed § 215.5(b)(1), (c)(1). For securities financing transactions, the Federal Reserve Proposal also would include a “simplified” credit exposure calculation equal to the market value of cash and securities transferred by the bank to the insider, less the market value of cash in a segregated deposit account with the bank in which the bank has a perfected security interest and any obligations of, or fully guaranteed as to principal and interest by, the United States or its agencies, transferred by the insider to the member bank. Id. Proposed § 215.5(d).
[37] OCC, Federal Reserve, FDIC, Farm Credit Administration and Federal Housing Finance Agency, Final Rule, Margin and Capital Requirements for Covered Swap Entities, 85 Fed. Reg. 39754, 39764 (July 1, 2020), available at https://www.federalregister.gov/documents/2020/07/01/2020-14097/margin-and-capital-requirements-for-covered-swap-entities.
[38] See OCC, Federal Reserve and FDIC, Regulatory Capital Rules: Regulatory Capital and Standardized Approach for Risk-Weighted Assets, 91 Fed. Reg. 15332, 15344 (Mar. 27, 2026), available at https://www.federalregister.gov/documents/2026/03/27/2026-05960/regulatory-capital-rules-regulatory-capital-and-standardized-approach-for-risk-weighted-assets; 12 C.F.R. § 217.34. See also OCC, Federal Reserve and FDIC, Regulatory Capital Rule: Category I and II Banking Organizations, Banking Organizations with Significant Trading Activity, and Optional Adoption for Other Banking Organizations, 91 Fed. Reg. 14952, 14963-64 (Mar. 27, 2026), available at https://www.federalregister.gov/documents/2026/03/27/2026-05959/regulatory-capital-rule-category-i-and-ii-banking-organizations-banking-organizations-with.
[39] Federal Reserve Proposal, at 49533.
[40] Id. Proposed § 215.5(b)(2).
[41] As discussed above, credit exposure to portfolio companies of a Qualified Fund Complex would not be subject to Regulation O solely due to the Presumption of Control.
[42] Federal Reserve Proposal, Proposed § 215.3(a).
[43] Id. at 49535-36; id. Proposed § 215.5(a). See 12 C.F.R. §§ 223.21(a), 223.23(a)(2)(i).
[44] Federal Reserve Proposal, at 49540; id. Proposed § 215.23(b).
[45] Id. at 49540.
[46] Id. Proposed § 215.3(e)(2)-(3).
[47] The full list of roles included under the definition of “executive officer” would be the chair of the board, president, treasurer, chief executive officer, chief financial officer, chief lending officer and chief investment officer. Id. Proposed § 215.2 (“Executive officer of a company or bank”).
[48] Id. Proposed § 215.13(a).
[49] Id. Proposed § 215.2 (“Acting in concert”); id. (“Class of voting securities”).
[50] Id. Proposed § 215.20(d)(2).
[51] See id. Proposed § 215.22; 12 U.S.C. § 1972(2).
[52] Federal Reserve Proposal, Proposed § 215.30(e).
[53] Id. at 49550.
This post is based on a Sullivan & Cromwell LLP memorandum, “Federal Reserve and FDIC Propose Revisions to Rules on Bank Lending to Insiders,” dated August 10, 2026, and available here.