[Subsections (a), (b),
and (c) were repealed by section 21, act of June 25, 1948 (62 Stat.
864), but substance thereof was incorporated in 18 USC 212, 213, 215,
655, 1906, and 1909.]
(d) [Reserved]
[12 USC 375. As added
by act of Sept. 26, 1918 (40 Stat. 971) and amended by act of July
21, 2010 (124 Stat. 1615).]
1-190
Interest on Deposits of Directors, Officers, and Employees (e) No member bank shall pay to any director,
officer, attorney, or employee a greater rate of interest on the deposits
of such director, officer, attorney, or employee than that paid to
other depositors on similar deposits with such member bank.
[12 USC 376. As added
by act of June 21, 1917 (40 Stat. 240); and amended by act of Sept.
26, 1918 (40 Stat. 971), which completely revised this section.]
1-191
Liability for Damages Resulting from Violations (f) If the directors or officers of any
member bank shall knowingly violate or permit any of the agents, officers,
or directors of any member bank to violate any of the provisions of
this section or regulations of the board made under authority thereof,
or any of the provisions of sections 217, 218, 219, 220, 655, 1005,
1014, 1906, or 1909 of title 18, United States Code, every director
and officer participating in or assenting to such violation shall
be held liable in his personal and individual capacity for all damages
which the member bank, its shareholders, or any other persons shall
have sustained in consequence of such violation.
[12 USC 503. As added
by act of Sept. 26, 1918 (40 Stat. 971), which completely revised
this section; amended by act of Sept. 3, 1954 (68 Stat. 1236). Sections
217, 218, 219, and 220 were respectively redesignated sections 212,
213, 214, and 215 by the act of Oct. 23, 1962 (76 Stat. 1125).]
1-192
Loans to Executive Officers by Member Banks (g) (1) Except as
authorized under this subsection, no member bank may extend credit
in any manner to any of its own executive officers. No executive officer
of any member bank may become indebted to that member bank except
by means of an extension of credit which the bank is authorized to
make under this subsection. Any extension of credit under this subsection
shall be promptly reported to the board of directors of the bank,
and may be made only if—
(A) The bank would be authorized to
make it to borrowers other than its officers;
(B) it is on terms not more favorable
than those afforded other borrowers;
(C) the officer has submitted a detailed
current financial statement; and
(D) it is on condition that it shall
become due and payable on demand of the bank at any time when the
officer is indebted to any other bank or banks on account of extensions
of credit of any one of the three categories respectively referred
to in paragraphs (2), (3), and (4) in an aggregate amount greater
than the amount of credit of the same category that could be extended
to him by the bank of which he is an officer.
(2) A member bank may make
a loan to any executive officer of the bank if, at the time the loan
is made—
(A) it is secured by a first lien on
a dwelling which is expected, after the making of the loan, to be
owned by the officer and used by him as his residence, and
(B) no other loan by the
bank to the officer under authority of this paragraph is outstanding.
1-193
(3) A member bank may make
extensions of credit to any executive officer of the bank, to finance
the education of the children of the officer.
(4) A member bank may make extensions of
credit not otherwise specifically authorized under this subsection
to any executive officer of the bank, in an amount prescribed in a
regulation of the member bank’s appropriate Federal banking agency.
(5) Except to the extent
permitted under paragraph (4), a member bank may not extend credit
to a partnership in which one or more of its executive officers are
partners having either individually or together a majority interest.
For the purposes of paragraph (4), the full amount of any credit so
extended shall be considered to have been extended to each officer
of the bank who is a member of the partnership.
1-194
(6) This subsection does not prohibit any
executive officer of a member bank from endorsing or guaranteeing
for the protection of the bank any loan or other asset previously
acquired by the bank in good faith or from incurring any indebtedness
to the bank for the purpose of protecting the bank against loss or
giving financial assistance to it.
(7) Each day that any extension of credit
in violation of this subsection exists is a continuation of the violation
for the purposes of section 8 of the Federal Deposit Insurance Act.
1-195
(8) The Board of Governors
of the Federal Reserve System may prescribe such rules and regulations,
including definitions of terms, as it deems necessary to effectuate
the purposes and to prevent evasions of this subsection.
[12 USC 375a.
As added by act of June 16, 1933 (48 Stat. 182); amended by Public
Resolution approved June 14, 1935 (49 Stat. 375); and by acts of Aug.
23, 1935 (49 Stat. 716); April 25, 1938 (52 Stat. 223); June 20, 1939
(53 Stat. 842); July 3, 1967 (81 Stat. 109); Nov. 10, 1978 (92 Stat.
3665); Oct. 15, 1982 (96 Stat. 1522); and Sept. 23, 1994 (108 Stat.
2233); and Oct. 13, 2006 (120 Stat. 1978).]
1-196
Extensions of Credit to Executive Officers,
Directors, and Principal Shareholders of Member Banks (h) (1) In general. No member bank may extend credit
to any of its executive officers, directors, or principal shareholders,
or to any related interest of such a person, except to the extent
permitted under paragraphs (2), (3), (4), and (6).
(2) Preferential
terms prohibited.
(A) In general. A member bank may extend credit to its executive officers, directors,
or principal shareholders, or to any related interest of such a person,
only if the extension of credit—
(i) is made on substantially the
same terms, including interest rates and collateral, as those prevailing
at the time for comparable transactions by the bank with persons who
are not executive officers, directors, principal shareholders, or
employees of the bank;
(ii) does not involve more than the normal risk of repayment or present
other unfavorable features; and
(iii) the bank follows credit underwriting
procedures that are not less stringent than those applicable to comparable
transactions by the bank with persons who are not executive officers,
directors, principal shareholders, or employees of the bank.
(B) Exception. Nothing in this paragraph shall
prohibit any extension of credit made pursuant to a benefit or compensation
program—
(i) that is widely available to employees
of the member bank; and
(ii) that does not give preference to any officer, director, or principal
shareholder of the member bank, or to any related interest of such person,
over other employees of the member bank.
1-197
(3) Prior approval required. A member bank may extend credit to
a person described in paragraph (1) in an amount that, when aggregated
with the amount of all other outstanding extensions of credit by that
bank to each such person and that person’s related interests, would
exceed an amount prescribed by regulation of the appropriate Federal
banking agency (as defined in section 3 of the Federal Deposit Insurance
Act) only if—
(A) the extension of credit has been
approved in advance by a majority vote of that bank’s entire board
of directors; and
(B) the interested party has abstained from participating, directly
or indirectly, in the deliberations or voting on the extension of credit.
(4) Aggregate limit on extensions of credit to any
executive officer, director, or principal shareholder. A member
bank may extend credit to any executive officer, director, or principal
shareholder, or to any related interest of such a person, only if
the extension of credit is in an amount that, when aggregated with
the amount of all outstanding extensions of credit by that bank to
that person and that person’s related interests, would not exceed
the limits on loans to a single borrower established by section 5200
of the Revised Statutes. For purposes of this paragraph, section 5200
of the Revised Statutes shall be deemed to apply to a State member
bank as if the State member bank were a national banking association.
1-198
(5) Aggregate limit on extensions of credit to all executive officers,
directors, and principal shareholders.
(A) In general. A member bank may extend credit
to any executive officer, director, or principal shareholder, or to
any related interest of such a person, if the extension of credit
is in an amount that, when aggregated with the amount of all outstanding
extensions of credit by that bank to its executive officers, directors,
principal shareholders, and those persons’ related interests would
not exceed the bank’s unimpaired capital and unimpaired surplus.
(B) More stringent limit authorized. The Board
may, by regulation, prescribe a limit that is more stringent than
that contained in subparagraph (A).
(C) Board
may make exceptions for certain banks. The Board may, by regulation,
make exceptions to subparagraph (A) for member banks with less than
$100,000,000 in deposits if the Board determines that the exceptions
are important to avoid constricting the availability of credit in
small communities or to attract directors to such banks. In no case
may the aggregate amount of all outstanding extensions of credit to
a bank’s executive officers, directors, principal shareholders, and
those persons’ related interests be more than 2 times the bank’s unimpaired
capital and unimpaired surplus.
1-198.1
(6) Overdrafts
by executive officers and directors prohibited.
(A) In general. If any executive officer or
director has an account at the member bank, the bank may not pay on
behalf of that person an amount exceeding the funds on deposit in
the account.
(B) Exceptions. Subparagraph (A) does not prohibit
a member bank from paying funds in accordance with—
(i) a written
preauthorized, interest-bearing extension of credit specifying a method
of repayment; or
(ii) a
written preauthorized transfer of funds from another account of the
executive officer or director at that bank.
(7) Prohibition on knowingly receiving unauthorized extension of credit. No executive officer, director, or principal shareholder shall knowingly
receive (or knowingly permit any of that person’s related interests
to receive) from a member bank, directly or indirectly, any extension
of credit not authorized under this subsection.
1-198.2
(8) Executive
officer, director, or principal shareholder of certain affiliates
treated as executive officer, director, or principal shareholder of
member bank.
(A) In general. For purposes of this subsection, any executive officer, director,
or principal shareholder (as the case may be) of any company of which
the member bank is a subsidiary, or of any other subsidiary of that
company, shall be deemed to be an executive officer, director, or
principal shareholder (as the case may be) of the member bank.
(B) Exception. The Board may, by regulation,
make exceptions to subparagraph (A) for any executive officer or director
of a subsidiary of a company that controls the member bank if—
(i) the executive officer or director does not have authority to
participate, and does not participate, in major policymaking functions
of the member bank; and
(ii) the assets of such subsidiary do not exceed 10 percent of the
consolidated assets of a company that controls the member bank and
such subsidiary (and is not controlled by any other company).
1-199
(9) Definitions. For purposes of this subsection:
(A) Company.
(i) In general. Except as provided in clause
(ii), the term “company” means any corporation, partnership, business
or other trust, association, joint venture, pool syndicate, sole proprietorship,
unincorporated organization, or other business entity.
(ii) Exceptions. The term “company” does not include—
(I) an insured depository institution (as
defined in section 3 of the Federal Deposit Insurance Act); or
(II) a corporation the
majority of the shares of which are owned by the United States or
by any State.
(B) Control. A person controls a company or bank if that person, directly or indirectly, or acting
through or in concert with 1 or more persons—
(i) owns, controls,
or has the power to vote 25 percent or more of any class of the company’s
voting securities;
(ii)
controls in any manner the election of a majority of the company’s
directors; or
(iii) has
the power to exercise a controlling influence over the company’s management
or policies.
(C) Executive officer. A person is
an “executive officer” of a company or bank if that person participates
or has authority to participate (other than as a director) in major
policymaking functions of the company or bank.
1-199.1
(D) Extension of
credit.
(i) In general. A member bank extends credit to a person by—
(I) making or renewing any loan, granting
a line of credit, or entering into any similar transaction as a result
of which the person becomes obligated (directly or indirectly, or
by any means whatsoever) to pay money or its equivalent to the bank
or
(II) having credit
exposure to the person arising from a derivative transaction (as defined
in section 5200(b) of the Revised Statutes of the United States (12
U.S.C. 84(b))), repurchase agreement, reverse repurchase agreement,
securities lending transaction, or securities borrowing transaction
between the member bank and the person.
(ii) Exceptions. The Board may, by regulation, make exceptions to
clause (i) for transactions that the Board determines pose minimal
risk.
(E) Member bank. The term “member bank” includes
any subsidiary of a member bank.
(F) Principal shareholder. The term “principal shareholder”—
(i) means any person that
directly or indirectly, or acting through or in concert with one or more persons,
owns, controls, or has the power to vote more than 10 percent of any
class of voting securities of a member bank or company; and
(ii) does not include a company
of which a member bank is a subsidiary.
(G) Related interest. A “related interest” of a person is—
(i) any company
controlled by that person; and
(ii) any political or campaign committee that
is controlled by that person or the funds or services of which will
benefit that person.
(H) Subsidiary. The term “subsidiary” has the same meaning as in section 2 of the
Bank Holding Company Act of 1956.
1-200
(10) Board’s rulemaking authority. The Board of Governors of the
Federal Reserve System may prescribe such regulations, including definitions
of terms, as it determines to be necessary to effectuate the purposes
and prevent evasions of this subsection.
[12 USC 375b. As added
by act of Nov. 10, 1978 (92 Stat. 3644) and amended by acts of Oct.
15, 1982 (96 Stat. 1520, 1522); Dec. 19, 1991 (105 Stat. 2355, 2358,
2359); Oct. 28, 1992 (106 Stat. 3895, 4086); Sept. 23, 1994 (108 Stat.
2233); Sept. 30 1996 (110 Stat. 3009-410); and July 21, 2010 (124
Stat. 1614).]
[Subsections (i), (j),
and (k) were repealed by section 21, act of June 25, 1948 (62 Stat.
866). However, substance of subsections (h), (i), and (k) was incorporated
in 18 USC 214, 656, 1005, and 1014. Subsection (j), which prohibited
members of Congress from receiving benefits from any contracts or
agreements of any Federal Reserve Bank was in effect continued in
title 18, section 433, which does not include contracts of Federal
Reserve Banks as exempt from the prohibition of section 431 against
such members having an interest in federal agency contracts.]
