A Regulation O wrinkle.

Q. Effective December 2006, Regulation O omitted the requirement that executive officers have to report other bank and/or correspondent bank indebtedness. Did this eliminate the requirement for the demand clause feature in loans to executive officers? I am guessing it did not, but how ore banks

A. No, the requirement for the demand feature is still there. You still have to assess whether the increase in Liabilities has impaired the executive officer's finances so that, to protect the bank, it would be prudent to exercise the demand feature.

You would know in several ways. Some banks are putting into their policies that executive officers should file a financial statement annually. A review of the annual statement should reveal if the conditions of the demand clause are present. Most banks require a financial statement for any extension of credit to an executive officer, so at any borrowing you should review the financial statement to determine whether the new credit should be extended or if the demand clauses on existing credit could and should be exercised.

Leslie Callaway, CRCM, contributing editor, works with ABA staff experts to provide answers to ABA member bank questions. Submit your questions to Leslie at lcallawa@aba.com