The Office of the Comptroller of the Currency and FDIC said today they will not take action against banks for extensions of credit to complex-controlled portfolio companies that otherwise would violate the Federal Reserve’s restrictions on lending to bank insiders, provided banks satisfy certain conditions.
The Fed’s Regulation O limits the amount and type of credit that may be extended to insiders and includes reporting and record-keeping requirements, according to the OCC. In a new bulletin, the agency said banks have expressed concerns that the treatment of fund complex-controlled portfolio companies as “related interests” under Regulation O could require the termination of preexisting lending relationships.
“To address this concern until Regulation O is appropriately amended, the statement provides banks flexibility to lend to certain fund complex-controlled portfolio companies,” the bulletin states.
The agencies anticipate they will rescind the guidance after the Fed adopts a final rule amending Regulation O to address the issue. Until then, it “will continue to be effective unless amended, superseded or amended in writing.”
