The FDIC did the arithmetic on what a bank executive may borrow from their own bank, got 421 percent, and proposes to use 400
Footnote 36 of the FDIC's proposal shows its working, and then declines to use it.
Nominal gross domestic product was 7455.29 in the fourth quarter of 1994 and 31,422.53 in the fourth quarter of 2025. That is 421 percent. The FDIC proposes to use 400 percent instead, on the stated ground that round numbers are easier to comply with. Applied to the two dollar limits on what a bank may lend the people who run it, that means $100,000 becomes $400,000 and $500,000 becomes $2,000,000.
The proposal was filed at the Federal Register on Wednesday morning and publishes on Thursday. Comments close 60 days after that.
Which numbers move
Two thresholds sit in 12 CFR part 337, and both come from sections 22(g) and (h) of the Federal Reserve Act by way of the Federal Deposit Insurance Act.
The first is the amount an executive officer may borrow from their own bank for a purpose the statute does not otherwise authorise. The second is the amount above which a loan to any insider, meaning an executive officer, a director, a principal shareholder or a related interest, needs prior approval from the board of directors. After the change, prior approval would be required when the aggregate to any one insider exceeds the lower of 5 percent of unimpaired capital and unimpaired surplus or $2,000,000. The general purpose ceiling for an executive officer would be the lower of 2.5 percent of the same capital measure or $400,000.
The percentages do not change. Only the dollar figures do, which means the amendment binds at banks small enough that the dollar figure is the tighter of the two tests.
Why 1994
Because that is the last time the FDIC considered adjusting one of these figures for growth and inflation, and it decided not to. The citation is 59 FR 66666, 28 December 1994, and the reason recorded there was to keep insured state nonmember banks on an equal footing with state member banks.
Thirty-one years of holding a nominal figure still is itself a policy, and the proposal says as much: fixed thresholds have become steadily more restrictive.
The index is GDP, not prices
The FDIC would republish the ratio and the updated thresholds every five years, using seasonally adjusted nominal GDP from the Bureau of Economic Analysis.
It considered the consumer price index for urban wage earners and clerical workers, which it already uses to adjust several other thresholds of its own. It rejected it here, and the reason is stated plainly: anything other than nominal GDP would drift away from the thresholds set by the other federal banking agencies, and similar banks would end up on different numbers. The Federal Reserve is proposing the same method for Regulation O, and because the Comptroller of the Currency's rules incorporate Regulation O by reference, national banks would move automatically if the Fed adopts.
One more thing sits in the Fed's companion proposal, described in the FDIC's first footnote. The list of job titles that make somebody an executive officer has not changed since 1935. The Fed would drop every vice president, the cashier and the secretary, and add the chief executive, the chief financial officer, the chief lending officer and the chief investment officer.
