Fed extends rule allowing directors, shareholders to apply for PPP loans

The Federal Reserve announced on July 15 that it would extend a temporary exemption from Regulation O to allow bank directors and shareholders to receive Paycheck Protection Program loans from their related banks. Reg O generally limits lending activity to bank directors, shareholders, officers and businesses owned by these persons.

The exception—which applies only to PPP loans—will be extended through Aug. 8, the new expiration date for the PPP. The Fed added that any PPP loans extended to bank directors and shareholders must conform to SBA’s recent guidance, which states that the eligible business must follow the same process as any similarly situated customer or account holder and must not receive favoritism from the bank.

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