Bank insider credit limits raised under proposal

The proposal raises dollar-based thresholds in Regulation O for the first time since 1994 to reflect economic growth and inflation.

Under the proposed adjustments, the threshold for credit card debt exempt from the definition of extension of credit rises from $15,000 to $60,000, while the interest-bearing overdraft plan threshold increases from $5,000 to $20,000. Inadvertent overdraft exceptions increase from $1,000 to $4,000, and the limit on loans to executive officers for general purposes expands from $100,000 to $400,000. Additionally, the threshold requiring prior approval by a bank's board of directors for large insider loans increases from $500,000 to $2,000,000. All thresholds will automatically index every five years based on cumulative nominal GDP growth.

The proposed rule exempts portfolio companies of qualifying passive fund complexes from the rebuttable presumption of control under Regulation O. Driven by the growth of index funds, passive managers frequently hold over 10 percent of bank voting shares, inadvertently capturing thousands of commercial borrowers as bank insiders.

Qualifying fund complexes must meet specific passivity criteria, including maintaining non-index fund bank holdings below 10 percent.

The rulemaking also incorporates Dodd-Frank Act provisions governing asset sales and derivative credit exposures.