The Rules on Bank Lending to Insiders Still Use 1994 Dollar Figures. The Fed Wants to Quadruple Them.

Regulation O is the Federal Reserve rule that decides what a bank may lend to the people who run it. It covers executive officers, directors and principal shareholders, and it works largely through dollar thresholds: below a figure, a loan is exempt or needs no special process; above it, the full board has to approve the credit in advance, and in some cases the bank has to disclose it. The Board says the rule has not had a comprehensive revision since 1979, and the six thresholds that do most of the work were last adjusted in 1994. A proposal issued on July 31, 2026 would raise all six by roughly four times, and then stop them going stale.

Six numbers set in 1994

The proposal pairs each current threshold with a replacement. The pattern is consistent: the new figure is about four times the old one.

• Credit card debt exemption: $15,000 now, $60,000 proposed.
• Overdraft exemption for interest-bearing accounts: $5,000 now, $20,000 proposed.
• Inadvertent overdraft exception: $1,000 now, $4,000 proposed.
• Unsecured lending for an other purpose: $100,000 now, $400,000 proposed.
• Prior board approval requirement: $500,000 now, $2,000,000 proposed.
• Public disclosure threshold: $500,000 now, $2,000,000 proposed.

The practical effect is easiest to see at the top of that list. A bank officer with a $20,000 credit card balance is, under today's $15,000 figure, outside the exemption. Under the proposed $60,000 figure, that officer is inside it. Nothing about the loan has changed; the yardstick has.

Indexing, every five years

The second half of the proposal is the part designed to prevent a repeat. Rather than leaving the figures to the next rulemaking, the proposal would update them every five years based on changes in nominal GDP, measured from 1994. The Board describes the methodology as aligned with the approach used in recent proposals on the capital surcharge for global systemically important banks.

What the proposal leaves alone

Several of the structural limits are not on the table.

• The definition of a principal shareholder stays at more than 10 percent of a class of voting securities.
• The limit on credit to a single insider stays at 25 percent of bank capital.
• The aggregate limit on credit to all insiders stays at 100 percent of bank capital.

Because the caps are expressed as percentages of capital rather than in dollars, they have risen with bank balance sheets for the past three decades. The dollar thresholds have not. That divergence is the whole argument for the proposal.

The reason the Board gives

The Board frames the change partly as a community bank governance question: small banks compete for directors with businesses that have no equivalent lending restrictions.

Community banks often face challenges recruiting experienced business leaders to serve as members of bank boards.

Alongside the thresholds, the Board says the proposal would address how the rule applies to passive interests held by investment funds, codify statutory requirements, and write down long-standing regulatory interpretations that currently sit outside the rule text.

The deadline

Comments were originally due 60 days after Federal Register publication, which fell on October 5. On October 2 the Board extended the period to November 4, 2026, saying it wanted to give interested parties more time to examine the proposal. That is the one date in this file that has already moved once.