DEFINITION of 'Insider Lending'

When a bank makes a loan to one or more of its own officers or directors. Many countries, including the U.S., require that the provisions of these loans match those of comparable bank customers. This is done to ensure fairness and limit the access to bank funds by insiders.

BREAKING DOWN 'Insider Lending'

The 1991 law that recapitalized the FDIC also mandated new restrictions on the loan provisions offered to bank insiders. The restrictions include requiring the same loan rates, repayment terms and evaluation of the borrower/insider's ability to repay the loan. This term should not be confused with insider trading.

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