Once again, federal banking agencies said no action will be taken against banks or other firms that sponsor, manage, or advise investment funds and institutional accounts that become principal shareholders of banks. The agencies made the announcement Friday.
The agencies have come to make the announcement each year; the current deadline for the “discretion” is Jan. 1; the new statement extends the discretion period to Jan. 1, 2026.
The agencies said agencies they will continue to exercise discretion not to act against banks or other firms 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.
Although the latest extension will run to Jan. 1, 2026, 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.