1 Commercial Finance Guide § 7.12

Summary

• [1] Regulation U

  Federal Reserve Board Regulation U1 applies to all domestic banks and their subsidiaries, and to any domestic agency or branch of a foreign bank (“bank lenders”) and to any other person other than brokers and dealers (“non-bank lenders,” collectively with bank lenders, “Lenders”). Regulation U restricts the amount of credit that a lender may extend for the purpose of purchasing or carrying margin stock (a “purpose credit”), if the credit is secured, directly or indirectly, by “margin stock.” Regulation U is violated when a lender makes a loan which is directly or indirectly secured by margin stock, for the purpose of purchasing or carrying any margin stock, and in an amount exceeding the maximum loan value of the collateral, as prescribed from time to time by the Federal Reserve Board (currently 50 percent of current market value of margin stock serving as collateral, and the “good faith loan value” of nonmargin stock collateral). Credits not ...