Regulation W: Definition in Banking and When It Applies

Regulation W is a regulation issued by the Board of Governors of the Federal Reserve System (FRB) that governs the extension of credit by banks and other lenders to their executive officers and directors. The regulation is intended to prevent conflicts of interest and to protect the safety and soundness of the banking system.

Regulation W applies to all banks and other lenders that are subject to the FRB's regulations, including national banks, state banks, and savings and loan associations. The regulation also applies to foreign banks that have branches or agencies in the United States.

Under Regulation W, banks and other lenders are prohibited from extending credit to their executive officers and directors on terms that are more favorable than those offered to other borrowers. The regulation also prohibits banks and other lenders from extending credit to their executive officers and directors for the purpose of acquiring control of the bank or other lender.

In addition to the general prohibitions on extending credit to executive officers and directors, Regulation W also contains specific requirements for certain types of credit transactions. For example, Regulation W requires banks and other lenders to obtain the prior approval of the FRB before extending credit to their executive officers and directors for the purpose of purchasing securities.

Regulation W is an important regulation that helps to protect the safety and soundness of the banking system. The regulation prevents conflicts of interest and helps to ensure that banks and other lenders are not extending credit to their executive officers and directors on favorable terms.

Here are some additional details about Regulation W:

• The regulation was first issued in 1933 in response to the Great Depression. The regulation was intended to prevent banks from extending credit to their executive officers and directors in a way that would jeopardize the safety and soundness of the banking system.
• Regulation W has been amended several times over the years. The most recent amendments were made in 2013. The amendments were intended to clarify the regulation and to make it more effective.
• Regulation W is enforced by the FRB. The FRB can take action against banks and other lenders that violate the regulation. The FRB can impose fines, require banks to take corrective action, or even revoke a bank's charter.

If you have any questions about Regulation W, you should contact your bank or other lender. You can also contact the FRB directly.