Datasoft, a computer company in Norcross, Ga., has released software to help bankers comply with Regulation O, which limits the amount of credit banks may extend to executive officers.
Reg-O for Windows amasses loan dam, compiles insider relationships, and squares the results to state and federal regulations.
Scott Fairbairn, Datasoft's president, said many bankers don't understand the complexities of the insider lending rule, and "the ones who do understand have a hard time doing the calculations right"
Datasoft says it has the first insider lending software. It's been on the market for about three months. The product initially costs $1,500. Users then pay 10% to 20% of that total for annual maintenance, which includes toll-free support and updates on diskette.
Keeping Tabs on Exposure The software analyzes insiders' personal exposure, as well as loans executives have co-signed or have an interest in.
Mr. Fairbairn said most banks track insider loans manually or through spreadsheet programs, which can lead to mistakes. A large percentage of failed banks were in violation of Reg O, he said. He added that some of that noncompliance was probably unintentional.
To use the program, the hanker must input the names of all the insiders, as well as call report information, which is used to determine the legal lending limit for compliance. Loan data is entered automatically through an import function in the system.
Once all the information is in, the banker can run the "analyzer," which consolidates the data and checks it against the regulations. Depending on loan activity, banks may want to run the analyzer daily, weekly, or monthly, he said.
After the analysis is complete, any of 18 reports may be printed. These reports include, for example, listing every loan that exposes an insider.
Evidence of Good Will
Mr. Fairbairn said these reports give evidence to examiners that the bank is trying to comply. The software also includes a "what if' function. The user can create a loan scenario and then evaluate how it affects every insider in the bank.
Mr. Fairbairn said banks arc now taking Reg O more seriously. "The capability to move information around is here," he said. "Banks just have to learn about it."