Action will continue not be taken against banks or other firms that sponsor, manage, or advise investment funds and institutional accounts that become principal shareholders of banks, federal banking regulators said Friday.
An interagency statement issued by the regulators extended a previous “no action” extension that was due to expire Jan. 1. The previous extension was originally issued Dec. 22, 2022.
According to the statement, the agencies will continue to exercise discretion not to take action against banks or against certain companies that sponsor, manage, or advise investment funds and institutional accounts (known as “fund complexes”) that become principal shareholders of banks (also known as “principal shareholder fund complexes”).
The agencies noted that the discretion relates to certain extensions of credit by banks to portfolio companies of the principal shareholder fund complex (the “fund complex-controlled portfolio companies”) that otherwise would violate Regulation O (the rule that prohibits a bank from extending credit to an insider that is not made on substantially the same terms), provided certain eligibility criteria are satisfied.
This latest extension will run for one year (to Jan. 1, 2025), the agencies said. However, it will end on the effective date of any Federal Reserve rule finalizing a revision to Regulation O that addresses the treatment of extensions of credit by a bank to fund complex-controlled portfolio companies that are insiders of the bank, the agencies said.