Academic journal article ABA Banking Journal


Academic journal article ABA Banking Journal


Article excerpt

Insider Lending Reg Continues To Vex

Q. Under Regulation 0, the payment of an overdraft for more than five business days is a violation. What is the definition of five business days? Also, are overdrafts of accounts to an executive officer's or director's children, business affiliates, or trusts covered it the director or officer is a signator on the account?

-S.F., Kan.

A. Regulation 0 does not define "business day," although you can most likely count all days that you are open for business and are posting to accounts. That would mean that Saturdays may or may not count for a business day, depending on your institution's procedures.

Regulation 0, as footnoted in Section 215.4(e)(1), states that the prohibition on paying overdrafts does not apply to the payment by a bank of an overdraft of a related interest of an executive officer, director, or principal shareholder. A related interest is defined in part as a company that is controlled by that person. Further, the definition of a company includes corporations, partnerships, trusts, association, joint ventures, pool syndicates, sole proprietorships, unincorporated organizations, or any other form of business entity.

Business affiliates and trusts would be excluded from the prohibition; however, paying overdrafts for joint accounts would be prohibited. …

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