C.F.R. » Title 12 » CHAPTER II—FEDERAL RESERVE SYSTEM › SUBCHAPTER A—BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM › PART 215—LOANS TO EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL SHAREHOLDERS OF MEMBER BANKS (REGULATION O)

12 C.F.R. § 215.3

Extension of credit

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(a) An extension of credit is a making or renewal of any loan, a granting of a line of credit, or an extending of credit in any manner whatsoever, and includes:

(1) A purchase under repurchase agreement of securities, other assets, or obligations;

(2) An advance by means of an overdraft, cash item, or otherwise;

(3) Issuance of a standby letter of credit (or other similar arrangement regardless of name or description) or an ineligible acceptance, as those terms are defined in § 208.24 of this chapter;

(4) An acquisition by discount, purchase, exchange, or otherwise of any note, draft, bill of exchange, or other evidence of indebtedness upon which an insider may be liable as maker, drawer, endorser, guarantor, or surety;

(5) An increase of an existing indebtedness, but not if the additional funds are advanced by the bank for its own protection for:

(i) Accrued interest; or

(ii) Taxes, insurance, or other expenses incidental to the existing indebtedness;

(6) An advance of unearned salary or other unearned compensation for a period in excess of 30 days; and

(7) Any other similar transaction as a result of which a person becomes obligated to pay money (or its equivalent) to a bank, whether the obligation arises directly or indirectly, or because of an endorsement on an obligation or otherwise, or by any means whatsoever.

(b) An extension of credit does not include:

(1) An advance against accrued salary or other accrued compensation, or an advance for the payment of authorized travel or other expenses incurred or to be incurred on behalf of the bank;

(2) A receipt by a bank of a check deposited in or delivered to the bank in the usual course of business unless it results in the carrying of a cash item for or the granting of an overdraft (other than an inadvertent overdraft in a limited amount that is promptly repaid, as described in § 215.4(e) of this part);

(3) An acquisition of a note, draft, bill of exchange, or other evidence of indebtedness through:

(i) A merger or consolidation of banks or a similar transaction by which a bank acquires assets and assumes liabilities of another bank or similar organization; or

(ii) Foreclosure on collateral or similar proceeding for the protection of the bank, provided that such indebtedness is not held for a period of more than three years from the date of the acquisition, subject to extension by the appropriate Federal banking agency for good cause;

(4)(i) An endorsement or guarantee for the protection of a bank of any loan or other asset previously acquired by the bank in good faith; or

(ii) Any indebtedness to a bank for the purpose of protecting the bank against loss or of giving financial assistance to it;

(5) Indebtedness of $15,000 or less arising by reason of any general arrangement by which a bank:

(i) Acquires charge or time credit accounts; or

(ii) Makes payments to or on behalf of participants in a bank credit card plan, check credit plan, or similar open-end credit plan, provided:

(A) The indebtedness does not involve prior individual clearance or approval by the bank other than for the purposes of determining authority to participate in the arrangement and compliance with any dollar limit under the arrangement; and

(B) The indebtedness is incurred under terms that are not more favorable than those offered to the general public;

(6) Indebtedness of $5,000 or less arising by reason of an interest-bearing overdraft credit plan of the type specified in § 215.4(e);

(7) A discount of promissory notes, bills of exchange, conditional sales contracts, or similar paper, without recourse; or

(8) Except for purposes of § 215.5 of this part, a loan:

(i) Made pursuant to the “Paycheck Protection Program” in which the participation by the Small Business Administration on a deferred basis is 100 percent;

(ii) For which material terms, including the maturity and the interest rate, are set by the Small Business Administration;

(iii) That is made during the “covered period,” as that term is defined in 15 U.S.C. 636(a)(36)(A)(iii), but in no case later than March 31, 2022; and

(iv) That would not be prohibited by 13 CFR 120.110(o) or rules or interpretations thereof issued by the Small Business Administration.

(c) Non-interest-bearing deposits to the credit of a bank are not considered loans, advances, or extensions of credit to the bank of deposit; nor is the giving of immediate credit to a bank upon uncollected items received in the ordinary course of business considered to be a loan, advance or extension of credit to the depositing bank.

(d) For purposes of § 215.4 of this part, an extension of credit by a member bank is considered to have been made at the time the bank enters into a binding commitment to make the extension of credit.

(e) A participation without recourse is considered to be an extension of credit by the participating bank, not by the originating bank.

(f) Tangible economic benefit rule—(1) In general. An extension of credit is considered made to an insider to the extent that the proceeds are transferred to the insider or are used for the tangible economic benefit of the insider.

(2) Exception. An extension of credit is not considered made to an insider under paragraph (f)(1) of this section if:

(i) The credit is extended on terms that would satisfy the standard set forth in § 215.4(a) of this part for extensions of credit to insiders; and

(ii) The proceeds of the extension of credit are used in a bona fide transaction to acquire property, goods, or services from the insider.

[Reg. O, 59 FR 8837, Feb. 24, 1994; 59 FR 37930, July 26, 1994; 63 FR 58621, Nov. 2, 1998; 85 FR 22349, Apr. 22, 2020; 85 FR 43121, July 16, 2020; 86 FR 9839, Feb. 17, 2021; 86 FR 27509, May 21, 2021]
Notes of Decisions
Cited in 12 cases, 1979–2019 · leading case: Regions Bank v. Legal Outsource PA, 936 F.3d 1184 (11th Cir. 2019).
Sort: Relevance Newest Treatment
Regions Bank v. Legal Outsource PA, 936 F.3d 1184 (11th Cir. 2019). “, 12 C.F.R. 215.3(a)(4). 63 Case: 17-11736 Date Filed: 08/28/2019 Page: 64 of 88 First, in support of its argument, the Majority Opinion inexplicably invites readers to consider an incongruous hypothetical, arguing that parents who seek to bribe their daughter’s way into college…”
Augustus I. Cavallari, Jr. v. Off. of the Comptroller of the Currency, & Bd. of Governors of the Fed. Reserve Sys., 57 F.3d 137 (2d Cir. 1995). · cites it 3× “The order, issued by the OCC on July 16, 1990, stated: The Bank shall not approve, purchase, grant, make, or fund any loan or other extension of credit, as defined in 12 C.F.R. § 215.3 , to any of the following former or current officers or directors of Security Savings and Loan…”
United States v. Gary L. Shively, United States of Am. v. G. Winfield Pardee, 715 F.2d 260 (7th Cir. 1983). “§ 375a; 12 C.F.R. §§ 215.3 (a)(8), 215.4(b) (1983); Adato v.”
Michael v. Fed. Deposit Ins., 687 F.3d 337 (7th Cir. 2012). · cites it 2× “” 12 C.F.R. § 215.3 (f). The rule’s only exception requires that (1) the bank extend credit on terms that meet § 215.”
Regal Sav. Bank v. Sachs, 722 A.2d 377 (Md. 1999). · cites it 2× “” 12 C.F.R. § 215.3 (a)(2) (1993). The regulation specifically addresses overdrafts in relevant part as follows: “No member bank may pay an overdraft of an executive officer or director of the bank3 on an account at the bank, unless the payment of funds is made in accordance…”
In re TD Bank, N.A., 150 F. Supp. 3d 593 (D.S.C. 2015). “4001 does not define “extension of credit,” one should look to the definition in Regulation O, 12 C.F.R. § 215.3 , which includes “an advance by means of an overdraft, cash item or otherwise.”
Farrell v. Bank of Am., N.A., 224 F. Supp. 3d 1016 (S.D. Cal. 2016). “12 C.F.R. 215.3(a)(2). Defendant cites to Shaw, 2015 WL 6142903 at *3 and In re TD Bank, N.”
United States v. James D. Bates, 852 F.2d 212 (7th Cir. 1988). “Bates failed to obtain such approval. In addition, although Lake Shore’s lending policy would have allowed the loan if Bates had obtained approval, federal banking regulations in effect in May and June 1982 prohibited Lake Shore from extending more than $10,000 credit to any…”
Johnson v. Bokf, Nat'l Ass'n, 341 F. Supp. 3d 675 (N.D. Tex. 2018). “12 C.F.R. § 215.3 (a)(2). For the same reasons, the Court rejects Johnson's argument that 12 C.”
Adato v. Kagan, 599 F.2d 1111 (2d Cir. 1979). “Under FDIC rules relating to unsafe and unsound banking practices, policy-making officers come within the definition of “insiders”, and an “insider’ transaction” is defined as one between the bank and “[a]ny-other person where the transaction inures to the tangible economic…”
Cnty. of Orange v. Fuji Sec., Inc., 31 F. Supp. 2d 768 (C.D. Cal. 1998). “The County notes that the Federal Reserve System defines extensions of credit to include repurchase transactions, see 12 C.F.R. § 215.3 , the Board of Governors of the Federal Reserve has cautioned that some reverse repurchase transactions may trigger lending limits, see…”
Lowe v. Fed. Deposit Ins. Corp., 958 F.2d 1526 (8th Cir. 1992). “11; see also 12 C.F.R. § 215.3 (f) and 12 C.F.R. § 215.”
— 12 C.F.R. § 215.3(a)(2) — 1 case
Farrell v. Bank of Am., N.A., 224 F. Supp. 3d 1016 (S.D. Cal. 2016). “12 C.F.R. 215.3(a)(2). Defendant cites to Shaw, 2015 WL 6142903 at *3 and In re TD Bank, N.”
— 12 C.F.R. § 215.3(a)(4) — 1 case
Regions Bank v. Legal Outsource PA, 936 F.3d 1184 (11th Cir. 2019). “, 12 C.F.R. 215.3(a)(4). 63 Case: 17-11736 Date Filed: 08/28/2019 Page: 64 of 88 First, in support of its argument, the Majority Opinion inexplicably invites readers to consider an incongruous hypothetical, arguing that parents who seek to bribe their daughter’s way into college…”
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