12 U.S.C. § 375b: Extensions of credit to executive officers, directors, and principal shareholders of member banks

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), (5), and (6). 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; does not involve more than the normal risk of repayment or present other unfavorable features; and 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. that is widely available to employees of the member bank; and 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. the extension of credit has been approved in advance by a majority vote of that bank’s entire board of directors; and the interested party has abstained from participating, directly or indirectly, in the deliberations or voting on the extension of credit. 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 84 of this title . For purposes of this paragraph, section 84 of this title shall be deemed to apply to a State member bank as if the State member bank were a national banking association. 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. The Board may, by regulation, prescribe a limit that is more stringent than that contained in subparagraph (A). 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. 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. a written preauthorized, interest-bearing extension of credit specifying a method of repayment; or a written preauthorized transfer of funds from another account of the executive officer or director at that bank. 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 section. For purposes of this section, 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. the executive officer or director does not have authority to participate, and does not participate, in major policymaking functions of the member bank; and 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). 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. an insured depository institution (as defined in section 1813 of this title ); or a corporation the majority of the shares of which are owned by the United States or by any State. owns, controls, or has the power to vote 25 percent or more of any class of the company’s voting securities; controls in any manner the election of a majority of the company’s directors; or has the power to exercise a controlling influence over the company’s management or policies. 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. 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 having credit exposure to the person arising from a derivative transaction (as defined in section 84(b) of this title ), repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction between the member bank and the person. The Board may, by regulation, make exceptions to clause (i) for transactions that the Board determines pose minimal risk. The term “member bank” includes any subsidiary of a member bank. 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 does not include a company of which a member bank is a subsidiary. any company controlled by that person; and any political or campaign committee that is controlled by that person or the funds or services of which will benefit that person. The term “subsidiary” has the same meaning as in section 1841 of this title . 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 section. the date on which final regulations under subsection (m)(1) [set out below] become effective [ May 18, 1992 , see 57 F.R. 22417]; or 150 days after the date of enactment of this Act [ Dec. 19, 1991 ].” The Board of Governors of the Federal Reserve System shall, not later than 120 days after the date of enactment of this Act [ Dec. 19, 1991 ], promulgate final regulations to implement the amendments made by this section [amending this section and sections 1468, 1828, and 1972 of this title], other than the amendments made by subsections (i) and (k) [amending sections 1468 and 1828 of this title]. The Federal Deposit Insurance Corporation and Director of the Office of Thrift Supervision shall each, not later than 120 days after the date of enactment of this Act, promulgate final regulations prescribing the maximum amount that a nonmember insured bank or insured savings association (as the case may be) may lend under section 22(g)(4) of the Federal Reserve Act [ 12 U.S.C. 375a(4) ], as made applicable to those institutions by subsections (k) and (i), respectively.”