DEFINITION of 'Regulation L'
One of the regulations set forth by the Federal Reserve. Regulation L disallows certain types of interlocking arrangements with directors for member banks and their respective holding companies. Any official of a state bank or holding company cannot act as a manager of an unaffiliated depository institution.
BREAKING DOWN 'Regulation L'
Regulation L also prohibits managers of member banks from managing other unaffiliated entities if both banks are large or in the same locality. Some types of interlocking business arrangements have grandfathering periods of up to 10 years. Exceptions are also made in some instances, such as for minority groups.