Fed and FDIC Roll Back Insider Lending Rules for Community Banks

The Federal Reserve Board and the Federal Deposit Insurance Corporation are continuing their deregulatory push in 2026 by easing rules governing insider lending at banks.

The proposals aim to update Regulation O, which has not been comprehensively updated since 1979, and would raise and index thresholds for lending limits for executive officers and other insiders of FDIC-supervised institutions. The FDIC's most significant proposed change is a quadrupling of the threshold at which board director approval is required for insider loans, from $500,000 to $2,000,000.

The practical effect of the changes will be felt most acutely at community banks, where the overlap between banker, board member, and local business owner has historically made compliance with Regulation O particularly complex. Michelle W. Bowman, Vice Chair for Supervision at the Federal Reserve Board, stated that 'community banks often face challenges recruiting experienced business leaders to serve as members of bank boards and as bank executives.'

Comments on the Fed's Regulation O proposal are due 60 days after publication in the Federal Register, while the FDIC's parallel rulemaking is also on the same timeline.