It is an extension of credit will be deemed to be made to an insider if the proceeds are transferred to the insider or used for the insider's benefit. This rule does not apply if the credit is made on substantially the same terms and conditions as those made to a noninsider and if the proceeds are used in a bona fide transaction involving the acquisition of property, goods, or services from the insider. What is it?
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A. B. C. D.A
The correct answer is B. Extension of credit-12 CFR 215.3.
The term "insider" refers to an individual or entity that has a close relationship with a bank, such as a director, officer, or principal shareholder of the bank, or any individual or entity that owns or controls more than 10% of the bank's outstanding stock.
Under 12 CFR 215.3, an extension of credit made by a bank to an insider will be deemed to be made to the insider if the proceeds of the credit are transferred to the insider or used for the insider's benefit. This means that if an insider borrows money from the bank and uses it for personal purposes, the transaction will be considered an extension of credit to the insider.
However, there is an exception to this rule. If the credit is made on substantially the same terms and conditions as those made to a non-insider, and if the proceeds are used in a bona fide transaction involving the acquisition of property, goods, or services from the insider, the transaction will not be considered an extension of credit to the insider. This exception is designed to prevent unfair discrimination against insiders and to ensure that they are able to conduct legitimate business transactions with the bank.
The other options are not correct:
A. Tangible economic benefit rule: This rule is used to determine whether a loan or other extension of credit is made for the purpose of providing a tangible economic benefit to a borrower. It is not directly related to the insider lending rule.
C. Lending restrictions: This term is too broad and vague to identify a specific rule or regulation related to insider lending.
D. Intangible economic-benefit rule: This term does not describe a specific rule or regulation and is not directly related to the insider lending rule.