Fed proposes first full overhaul of insider lending rules since 1979
The Federal Reserve is taking comment on a plan to modernize Regulation O, which governs loans to bank executives, directors and principal shareholders and has not been comprehensively revised in more than four decades.
The Federal Reserve Board on July 31, 2026 invited public comment on a proposal to modernize Regulation O, the rule that governs credit extended by banks to their own insiders — executive officers, directors and principal shareholders, according to a press release from the Board. The rule has not been comprehensively revised since 1979.
Under the proposal, the dollar-based lending thresholds in the rule would be updated and then indexed so that they rise with future economic growth, rather than being frozen at levels set decades ago. The Board also proposes to fix a problem in which the rule sweeps in passive stakes held in a company by investment funds, applying insider-lending restrictions where the Fed says they are not needed.
Other changes would write statutory requirements directly into the regulation, incorporate long-standing regulatory interpretations that banks currently have to track separately, and simplify how the rule is applied in practice.
In explaining the proposal, Vice Chair for Supervision Michelle Bowman said the changes clarify the standards while keeping in place the safeguards that guard against conflicts of interest, the Board said. The release noted that directors and officers of community banks are frequently local business owners and civic leaders, and that they bring information about, and expertise in, their local economies to the institutions they serve.
The notice, titled “Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks and Bank Holding Companies,” will be open for comment for 60 days after publication in the Federal Register, according to the Board.