Which of the following is true regarding extensions of credit to executive officers, directors, and principal shareholders?
A.
Must be approved in advance by the board of directors if the aggregate credit is more than the greater of either $25,000 or 5 percent of the bank's capital and surplus, not exceeding $500,000
B.
Must be approved in advance by the board of directors if the credit is greater than $50,000 or 5 percent of the bank's capital and surplus
C.
May not exceed $100,000 in the aggregate, regardless of approvals
D.
May not exceed $250,000 in the aggregate, regardless of approvals
This guideline falls under Regulation O, which governs extensions of credit by banks to their executive officers, directors, and principal shareholders (also known as insiders). Regulation O sets forth specific restrictions and requirements for loans to insiders to prevent conflicts of interest and ensure that any credit extended is on market terms and does not pose undue risk to the bank.
One of the key provisions requires that any extension of credit to an insider that exceeds the greater of $25,000 or 5 percent of the bank's capital and surplus, up to a maximum of $500,000, must receive prior approval from the bank's board of directors. This provision aims to ensure proper oversight and accountability for large loans to insiders, preventing preferential treatment and promoting the financial integrity of the bank.
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Cam22
4 months ago