Which Transactions Fall under Regulation O? | CRCM Exam | ABA

D

Regulation O is a Federal Reserve regulation that imposes restrictions on extensions of credit made by a member bank to its executive officers, directors, and principal shareholders. The purpose of this regulation is to prevent insider abuse and conflicts of interest in the lending practices of member banks.

Out of the transactions listed, only option D is subject to Regulation O. This is because it involves an extension of credit to a member of the bank's board of directors, which is specifically listed in the regulation as a covered transaction. The other options are not covered by Regulation O, and here's why:

A. Time deposit account held by a director - This is not a covered transaction under Regulation O because it does not involve an extension of credit.

B. Travel advance to an executive officer outstanding for less than 30 days - This is not a covered transaction under Regulation O because it is a short-term advance, and the regulation only applies to extensions of credit that are outstanding for more than 30 days.

C. Extension of credit to a director of an unaffiliated, competing, noncorrespondent bank - This is not a covered transaction under Regulation O because the director is not affiliated with the member bank making the extension of credit.

It's important to note that Regulation O has specific requirements for covered transactions, such as documentation, approval by the board of directors, and limits on the amount of credit that can be extended. Member banks must comply with these requirements to avoid potential regulatory penalties and reputational risks.