Banks operate under many laws and regulations. Often, these laws and regulations are enacted to correct abuses or practices that cause problems for banks and their customers. One area that is subject to a number of laws and regulations is a bank's lending activity. This section of the course focuses on a few of those laws and regulations.

The Federal Reserve's Regulation B implements the Equal Credit Opportunity Act and is one of a group of consumer regulations. Consumer regulations focus on customer disclosures and protections.

Regulation O (regarding Loans to Executive Officers, Directors and Principal Shareholders) and Regulation W (regarding Transactions between Member Banks and Their Affiliates) are safety and soundness regulations and deal with the risk of financial loss to the bank.

To see an example of regulatory issues in bank lending, let's return to the Insights board meeting where Sean Miller is about to present a loan request from Sam Wilson, a successful local farmer. The loan is being presented for board approval because the amount requested is well past the internal lending limits of the bank and therefore requires board approval.