Two federal banking agencies will no longer issue an annual letter to banks outlining their expectations for compliance with insider lending restrictions and related reporting requirements, an effort toward “greater certainty,” they said in a joint letter issued Thursday.
Instead, the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency (OCC) said they would issue the one statement and expect that banks would follow it – until the statement is changed in the future.
The change is spurred by expected adoption by the Federal Reserve Board of a final rule that revises Regulation O to fully address the treatment of extensions of credit by a bank to fund complex-controlled portfolio companies that are insiders of the bank.
Before Thursday, the agencies would issue, each year, a statement to clarify their compliance expectations for the rules banning insider lending restrictions. That started in 2019, when the two agencies (and the Federal Reserve) issued the “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.”
“Each subsequent December, the OCC, FDIC, and Board issued new one-year extensions,” the agencies said in their joint letter. “A statement by the agencies with no expiration date, rather than a statement subject to annual extensions, will provide banks with greater certainty regarding the agencies’ supervisory expectations.”
The agencies said in their letter that Thursday’s statement would continue to be effective “unless amended, superseded, or rescinded in writing.”
They said they anticipated that the statement will no longer be necessary upon the Fed’s adoption of the final rule revising Regulation O.
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