WASHINGTON – Federal banking regulators have proposed easing rules governing loans made by banks to their own executives, directors and major shareholders, the latest step in a broader effort by the Trump administration to reduce regulatory burdens on financial institutions, according to InvestmentNews.
The Federal Reserve Board and the Federal Deposit Insurance Corp. have each issued proposals to update Regulation O, which governs extensions of credit to bank insiders who could influence lending decisions. According to InvestmentNews, the proposals would modernize decades-old dollar thresholds, index them to economic growth and simplify compliance requirements while maintaining safeguards against preferential lending.
The proposals would also clarify how the rules apply to passive investments held through investment funds and make it easier for banks to determine compliance.
Preserving ‘Core Purpose’
Regulators said the changes are intended to preserve Regulation O’s core purpose of preventing favorable lending treatment for insiders while reducing unnecessary compliance costs.
The proposals are part of a broader deregulatory agenda that has reshaped federal banking oversight during 2026.
InvestmentNews noted that in April, the Federal Reserve, FDIC and Office of the Comptroller of the Currency finalized a rule lowering the Community Bank Leverage Ratio from 9% to 8%. That change took effect July 1 and was designed to provide regulatory relief to community banking organizations.
Ongoing Rollback Anticipated
The publication also cited forecasts from Washington policy research firm Capstone DC, which predicted early this year that federal banking regulators would continue pursuing reductions in supervisory, capital and reporting requirements for banks of all sizes.
The proposed Regulation O revisions are expected to have their greatest impact on community banks, where directors and executives often own local businesses that maintain lending relationships with the institutions they help oversee.
Federal Reserve Vice Chair for Supervision Michelle Bowman said the proposal updates outdated thresholds while preserving protections against conflicts of interest.
Particular Challenge for Community Banks
Bowman said community banks frequently face challenges recruiting experienced business leaders to serve on their boards because many potential directors are also business owners. She said the proposed revisions would provide clearer standards while supporting effective governance and maintaining appropriate safeguards.
InvestmentNews also noted that the Independent Community Bankers of America identified raising outdated regulatory thresholds as a key priority for community banks heading into 2026.
The Federal Reserve and FDIC are accepting public comments on the proposals for 60 days following their publication in the Federal Register.
