Insider Activities

Appendix A: Appendix A

General Rules on Insider Lending

This chart is a general guide to the statutes and regulations governing loans to insiders. It does not cover all aspects of the laws and regulations.

Affected Parties	12 USC 375a	12 USC 375b	12 CFR 215
Executive officers, directors, principal shareholders, and related interests	Applies only to executive officers.	Prohibits preferential terms, higher-than-normal risk of repayment, other unfavorable features. Loans to the person are combined with loans to related interests of the person for purposes of borrowing limits. The borrowing amount is subject to the single-borrower limits under 12 USC 84. Aggregate of all extensions of credit to insiders is limited to 100 percent of unimpaired capital and unimpaired surplus. Limit may be doubled for adequately capitalized banks with deposits of less than $100 million. Prohibits receiving an extension of credit not authorized under this section. Prohibits overdrafts unless pursuant to a preauthorized written agreement (executive officers and directors only).	Prohibits preferential terms, higher-than-normal risk of repayment, other unfavorable features. Loans to the person are combined with loans to related interests of the person for purposes of borrowing limits. Prior board approval, with the interested party abstaining, is required for an extension of credit to the person in an amount that, when aggregated with all other extensions of credit to the person and the related interests of the person, exceeds the greater of $25,000 or 5 percent of capital and surplus, and in all cases for an extension of credit to the person in an amount that, when aggregated with all other extensions of credit to the person and the related interests of the person, exceeds $500,000. The borrowing amount is subject to the single-borrower limits under 12 USC 84. Aggregate of all extensions of credit to insiders is limited to 100 percent of unimpaired capital and unimpaired surplus, with certain exceptions based on the nature of collateral. Overdrafts of executive officers and directors may not be paid except subject to certain conditions, unless the overdrawn account is $1,000 or less, the account is overdrawn for no more than five business days, and the insider is charged the same fee as any other customer in similar circumstances.
Executive officers only	Imposes additional limits on a bank’s extensions of credit to executive officers, including requirements that the loans be at arm’s length and preceded by the submission of a financial statement. Allows 1st lien mortgage loans and loans to finance children’s education without limit (although 375b imposes aggregate limits).		"Other purpose" loans are limited by 12 CFR 215.5 to $25,000 or 2.5 percent of unimpaired capital and unimpaired surplus, whichever is greater, up to $100,000.

Affected Parties

12 USC 375a

12 USC 375b

12 CFR 215

Executive officers, directors, principal shareholders, and related interests

Applies only to executive officers.

Prohibits preferential terms, higher-than-normal risk of repayment, other unfavorable features.

Loans to the person are combined with loans to related interests of the person for purposes of borrowing limits.

The borrowing amount is subject to the single-borrower limits under 12 USC 84.

Aggregate of all extensions of credit to insiders is limited to 100 percent of unimpaired capital and unimpaired surplus.

Limit may be doubled for adequately capitalized banks with deposits of less than $100 million.

Prohibits receiving an extension of credit not authorized under this section.

Prohibits overdrafts unless pursuant to a preauthorized written agreement (executive officers and directors only).

Prohibits preferential terms, higher-than-normal risk of repayment, other unfavorable features.

Loans to the person are combined with loans to related interests of the person for purposes of borrowing limits.

Prior board approval, with the interested party abstaining, is required for an extension of credit to the person in an amount that, when aggregated with all other extensions of credit to the person and the related interests of the person, exceeds the greater of $25,000 or 5 percent of capital and surplus, and in all cases for an extension of credit to the person in an amount that, when aggregated with all other extensions of credit to the person and the related interests of the person, exceeds $500,000.

The borrowing amount is subject to the single-borrower limits under 12 USC 84.

Aggregate of all extensions of credit to insiders is limited to 100 percent of unimpaired capital and unimpaired surplus, with certain exceptions based on the nature of collateral.

Overdrafts of executive officers and directors may not be paid except subject to certain conditions, unless the overdrawn account is $1,000 or less, the account is overdrawn for no more than five business days, and the insider is charged the same fee as any other customer in similar circumstances.

Executive officers only

Imposes additional limits on a bank’s extensions of credit to executive officers, including requirements that the loans be at arm’s length and preceded by the submission of a financial statement.

Allows 1st lien mortgage loans and loans to finance children’s education without limit (although 375b imposes aggregate limits).

"Other purpose" loans are limited by 12 CFR 215.5 to $25,000 or 2.5 percent of unimpaired capital and unimpaired surplus, whichever is greater, up to $100,000.

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