Federal Reserve Board requests comment on a proposal to modernize its rule governing the extension of credit to bank "insiders"—bank executives, board members a

The Federal Reserve Board announced a proposal to revise Regulation O, which governs credit extended to bank insiders such as executives, directors, and major shareholders. The rule, unchanged since 1979, currently uses outdated dollar thresholds that no longer reflect economic conditions. The proposal aims to update these thresholds and index them to future economic growth to ensure relevance. It also seeks to reduce unnecessary compliance burdens for passive investments held through funds while preserving protections against preferential lending practices.

The proposal addresses challenges faced by community banks, where board members and executives often contribute local expertise but may face stricter scrutiny under current rules. By modernizing thresholds and simplifying requirements, the Federal Reserve intends to make it easier for these institutions to recruit qualified leaders without compromising governance standards. The rule also codifies existing statutory requirements and incorporates long-standing regulatory interpretations to clarify compliance expectations.

Vice Chair for Supervision Michelle W. Bowman emphasized the proposal’s goal of balancing modernization with safeguards. She noted that community banks rely on experienced local leaders, many of whom are business owners, to strengthen governance and economic insight. The updated rule is designed to protect against conflicts of interest while supporting effective bank oversight and local economic engagement.

The Federal Reserve is seeking public comment on the proposal for 60 days after its publication in the Federal Register. The comment period allows stakeholders, including banks, industry groups, and the public, to provide feedback on the proposed changes before finalization. Media inquiries regarding the proposal should be directed to the Federal Reserve’s press office.