Banker rule FAQs: Regulation O and notice of branch closures

Many credit union staff are former bank employees. We forgive them for this because we’ve all made mistakes in our past.

The vast majority of substantive banking experience can be very helpful inside a credit union… most consumer regulations and many consumer financial industry standards are the same. However, there are two minor rules that apply to many banks that the NAFCU Compliance Team gets inquiries about regularly: Regulation O and Notices of Branch Closures.

Regulation O

Generally speaking, Regulation O (12 CFR Part 215) creates internal controls around insider loans, including additional due diligence, board responsibilities and aggregate limits. According to NCUA, the rule relies on public disclosure by banks as publicly traded institutions to deter improper insider commercial lending activities.

Regulation O actually does not apply to credit unions. Regulation O defines its scope as governing “extensions of credit made by a member bank to an executive officer, director, or principal shareholder of the member bank…” 12 CFR §215.1(b). A member bank is defined as any banking institution that is a member of the Federal Reserve System. See, 12 CFR §215.2(j). Since credit unions are not members of the Federal Reserve System, the requirements of Regulation O do not apply to them.



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