FDIC Proposes Bank-Insider Rule
WASHINGTON - The Federal Deposit Insurance Corp. has proposed a regulation that would severely curtail bank dealings with insiders.
The goal is to reduce insider abuses like those that contributed to 191 of the 590 bank failures from 1987 to 1989, the FDIC said. Comments on the proposal are being sought for 60 days.
There are already limits on the amount and type of loans that a bank may make to insiders. The proposed regulation would apply to 12 types of dealings aside from loans, including selling a bank's assets at below market rates and padding expense accounts.
The most significant change would prohibit a bank from investing in real estate in which an insider already had an ownership position. The plan would require nonmember state banks to draw up rules covering any deals between an institution and its directors, executive officers, or principal shareholders.