Reg O and W: Dealing with Insiders
Handling transactions with a bank’s insiders can be tricky business – there are several important regulatory requirements to be aware of, primarily Regulations O and W.
Regulation O addresses loans to insiders. Do you have a solid idea of who (and/or what) the bank’s insiders are? It can change frequently. Then you must deal with the myriad rules that apply when lending to them. Overdrafts, in particular, can be a thorny issue, and many banks have found themselves in trouble due to their practices.
Regulation W is, in the minds of many, the most complicated regulation out there to monitor. Reg W (which comes from the Federal Reserve Act Sections 23A and B) contains a multitude of requirements when dealing with transactions (and not just loans) with affiliates. Keeping track of just who the bank’s affiliates are can be daunting enough. There are further collateral requirements to keep track of as well.
