what is regulation o 
regulation o is a federal reserve regulation that places limits and stipulations on the credit extensions a member bank can offer to its executive officers principal shareholders and directors the regulation is designed to prevent bank directors trustees executive officers or principal shareholders from benefiting from favorable credit extensions understanding regulation oregulation o regulates the credit extensions that member banks can offer to individuals who are considered to be insiders with respect to the bank while bank insiders are not barred from taking out loans from a bank with which they are professionally associated federal law carefully regulates how that bank treats the insider as a customer in addition to setting restrictions on credit extensions for bank insiders regulation o requires that banks report any extensions provided to insiders in their quarterly reports regulation o also gives a clear definition of bank insiders dividing them into multiple tiers of association subject to different credit extension regulations insiders can be directors or trustees of a bank executive officers for example the president or treasurer or principal shareholders individuals who own or otherwise control more than 10 of the publicly traded shares of the institution generally speaking the restrictions in place are devised to ensure that bank insiders are not given more advantageous or generous credit extensions than the bank would provide for a non insider the bank cannot give credit extensions that it would not provide to a non insider customer nor can it extend credit beyond legal or self imposed lending limits one exception to this rule comes with compensation packages provided by banks to all employees including non insiders for example if a bank has a policy of waiving certain mortgage application fees for non insider employees such as tellers the same fees could be waived for the bank president who would be an insider implementation and expansionregulation o lays out the reporting requirements mandated by two financial laws the financial institutions regulatory and interest rate control act of 1978 and the depository institutions act of 1982 banks and other lending institutions are often able to find exceptions or workarounds to regulation o in effect providing preferential treatment to insiders without violating any of the regulations one of the provisions of the dodd frank wall street reform and consumer protection act provided an extended definition of credit extension to expand the scope of regulation o reg o covers national banks state banks savings associations and insured branches of foreign banking organizations special considerations for regulation orecent growth in investments in mutual funds exchange traded funds etfs and other index based investment products have caused a number of companies to pay greater attention to regulation o large asset management companies are becoming principal shareholders through fund complexes organizations that invest in funds a complex that acquires 10 of a class of voting securities of a banking organization is considered a principal shareholder 