Banking agencies extend ‘no-action’ relief for Reg O application to bank investment funds

The federal banking agencies have extended, to Jan. 1, 2022, temporary “no-action” relief for applying Regulation O to companies that manage funds investing in banking organizations.

The action by the agencies extends relief provided last year (Dec. 27, 2019). In a Financial Institution Letter (FIL115-2020) sent Tuesday, the Federal Deposit Insurance Corp. (FDIC) said it was extending the “no-action” relief as it (along with the Federal Reserve and Office of the Comptroller of the Currency [OCC]) consider whether to amend Reg O “to address concerns about unintended consequences of the application” of the regulation.

Reg O places limits and stipulations on the credit extensions a member bank can offer to its executive officers, principal shareholders, and directors. It covers insider loans and extensions of credit to executive officers, directors, or principal shareholders of a bank; a bank holding company of which the bank is a subsidiary; and any other subsidiary of that bank holding company.

The question the agencies are grappling with is how to apply Reg O to companies that sponsor, manage, or advise investment funds and institutional accounts that invest in voting securities of banking organizations.

Status of Certain Investment Funds and Their Portfolio Investments for Purposes of Regulation O and Reporting Requirements under Part 363 of FDIC Regulations