Federal Reserve extends comment deadline on proposed bank insider lending changes

The Federal Reserve Board said on October 2 that it had extended the public comment deadline for its proposed changes to Regulation O, the US rule governing bank loans to insiders, from October 5 to November 4. The extension gives interested parties more time to examine a proposal that could change lending thresholds and the treatment of some investment fund holdings.

The Board said it granted more time so interested parties could analyze the issues and prepare comments. Its announcement changes the deadline for responses; the amendments themselves remain proposals. The Federal Register describes the underlying document as a notice of proposed rulemaking and a request for public comment.

What Regulation O covers

Regulation O governs extensions of credit by a bank to its insiders. In announcing the extension, the Board identified bank executives, board members and major shareholders as people who could potentially influence a bank’s lending decisions. The proposed changes therefore concern rules for lending where a borrower’s position or ownership may create a conflict.

The Board requested comment on the modernization proposal on July 31, and the proposal appeared in the Federal Register on August 4. According to the Board’s account in that notice, Regulation O has not been comprehensively updated since 1979. The Board said it aims to modernize thresholds and address passive fund holdings while preserving safeguards against preferential treatment.

Proposed increases to insider lending thresholds

One proposed change concerns certain insider loans that require prior approval from a bank’s board. For those loans, the proposal would raise a dollar cap from $500,000 to $2 million, subject to a limit tied to the bank’s capital. Consumer Finance Monitor, in its analysis of the proposal, also identifies this proposed increase. The stated dollar amount is therefore only one part of the proposed test.

For specified loans to executive officers that are not otherwise authorized by statute, the proposal would raise a dollar threshold from $100,000 to $400,000. A percentage-of-capital limit would still apply. Consumer Finance Monitor describes the threshold changes as intended to reduce burdens while retaining statutory safeguards, and notes that the Federal Reserve and FDIC proposals cover different categories of institutions.

Why passive investment funds figure in the proposal

The proposal also addresses when companies held by qualifying passive fund complexes would be presumed to be controlled, and thus treated as related interests under Regulation O. The Federal Register analysis says a fund complex with more than 10 percent of a bank may be treated as a principal shareholder. A company controlled by that shareholder can then become a related interest subject to lending restrictions.

The Board’s analysis puts those questions in the context of growing fund ownership. It reports that index funds and exchange-traded funds held 63.6 percent of the combined domestic equity held by long-term active and index funds as of April 2026. It also reports a 247 percent increase, from the fourth quarter of 2004 to the fourth quarter of 2025, in the number of banks with fund-group ownership above 10 percent. These are figures presented in the Board’s proposal, not measured effects of the proposed changes.

The Federal Register notice cautions that data limitations may cause an underestimate of the entities potentially affected. PwC’s August analysis identifies further proposed clarifications involving certain leases, debt securities, guarantees and credit derivatives, as well as loans involving spouses, trusts and estates. Those provisions broaden the range of questions for commenters beyond the headline dollar thresholds.

November 4 deadline and the questions still open

Interested parties now have until November 4 to comment, according to the Board’s October 2 announcement. The extra time allows responses to address both the proposed thresholds and the treatment of fund holdings and other transactions. The announcement does not say which provisions the Board might change after reviewing comments or when it might issue a final rule.