Answered by:
Question:
We regularly monitor personal accounts of our directors and EOs. Is a related interest account defined as any account on which an EO or director has signatory rights? If a director is the primary owner of a business account, is it necessary for us to monitor the account for Reg O overdrafts? If a director is an authorized signer of a business account, is it necessary for us to monitor the account for Reg O overdrafts? If a director is a minority of an account, is it necessary for us to monitor the account for Reg O overdrafts? The Reg states a member bank is to charge the same fee any other customer of the bank would pay in similar circ*mstances. At our institution, if a customer has an overdraft and makes a deposit/transfer the same day, we generally waive the fee as a courtesy due to the balances they carry with us. Is this a violation of Reg O to treat EO and directors the same as we would the above client?
Answer:
This is covered in section 215.4(e), and footnote three to this section contains some additional clarifying language that answers most of your questions. A related interest account is an account owned by a related interest of an insider. A related interest is an entity owner or controlled by the insider.
My understanding is that the overdraft provisions apply to accounts that are owned by a director or an executive officer. They do not apply to an account owned by a business entity that is owned by the director or executive officer. They do not apply to an account that is not owned by the director or executive officer, but on which they have signatory authority.
- You ask, "If a director is the primary owner of a business account, is it necessary for us to monitor the account for Reg O overdrafts?" If the account is a business purpose account, but it is owned (individually or jointly with someone else) in an individual capacity by the director, then yes, this account would be subject to Reg O overdraft restrictions, but if the account is owned in a business name and that business is in turn owned by the director, then it is a related interest account and would not be subject to Reg O overdraft restrictions, even if the director is the only owner of the business and the only signer on the account.
- You ask, "If a director is an authorized signer of a business account, is it necessary for us to monitor the account for Reg O overdrafts?" Again, if the director is not an owner of the account, then it is not subject to Reg O overdraft restrictions.
- You ask, "If a director is a minority of an account, is it necessary for us to monitor the account for Reg O overdrafts?" Not sure what you mean by "minority of an account", but if the director owns even part of the account in an individual capacity, it would be subject to Reg O overdraft restrictions.
- Finally, to the fees. If you waive the fee for every single customer that makes a deposit/transfer same day, then I would say you could do the same for your director or EO, but if you charge even one customer the fee even when they make the deposit same day, I'd recommend that you not waive the fee for your insiders.
First published on BankersOnline.com 1/03/11
Filed under:
Filed under compliance as: