Insider Lending
Categories: Company Management, Credit
Bankers have a bunch of money at their disposal. If they want, they can head back to the vault after-hours, strip down to their skivvies and just roll around in the cash. However, there are limits. A bank can't just hand out sweetheart loans to all its employees.
Which is where insider lending comes in.
The phrase refers to the practice of banks making loans to bigwigs in its organization...people like its officers or directors. Since insider lending is ripe with possibilities for corruption, the government has rules in place about when it can happen.
Basically, a bank can't make a loan to an officer or director that it wouldn't make in similar circumstances to an outsider. It must apply the same standards and rules when contemplating the provisions of an inside loan as it does with regular customers.