Regulatory Alerts1998-02-01
Regulation No. 2 - Overdrafts by Officers and Employees
The Alabama Superintendent of Banks, with the concurrence of the State Banking Board, promulgated Regulation No. 2 to enforce restrictions on bank overdrafts for directors, executive officers, and employees. State-chartered banks must ensure that overdrafts for directors and executive officers comply with Federal Reserve Board Regulation O, while overdrafts for non-executive officers and employees must adhere to the bank's standard written policies, fee structures, and risk assessments applicable to other customers. This regulation became effective on February 1, 1998, to ensure that extensions of credit to bank insiders do not exceed normal repayment risks or offer more liberal terms than those available to general customers.
REGULATION NO. 2 WHEREAS, Section 5-2A-8 of the Alabama Banking Code provides that the Superintendent of Banks may, with the concurrence of a majority of the State Banking Board, promulgate reasonable regulations; AND WHEREAS, Section 5-6A-22 of the Alabama Banking Code prohibits any officer, director, or employee of a bank from overdrawing his or her account except as the Superintendent of Banks shall allow by regulation: NOW THEREFORE, be it known that the Superintendent, with the concurrence of the State Banking Board, does hereby promulgate the following regulation: For purposes of this regulation, the definition of an executive officer shall be the same as that found in Regulation O of the Federal Reserve Board of Governors. No state-chartered bank in Alabama may pay an overdraft of a director or executive officer of the bank on an account at the bank unless the payment of funds is made in accordance with the provisions of Regulation O of the Federal Reserve Board of Governors. In addition, no state-chartered bank may pay an overdraft of a nonexecutive officer or employee unless: -the overdraft is paid in accordance with a written policy of the bank which is no more liberal regarding employee overdrafts than the bank's policies regarding overdrafts of any other bank customer in similar circumstances, -the bank charges the non-executive officer or employee the same fee charged any other customer of the bank in similar circumstances, and -the extension of credit represented by the overdraft presents no more than the normal risk of repayment. This regulation shall be effective February 1, 1998 s/Wayne C. Curtis Superintendent of Banks