What is regulation u?
regulation for the Federal Reserve of the United States, which concerns loans provided by banks for the purchase of margin supplies. It applies to investments such as stocks, over -the -counter securities and most mutual funds. This Regulation first adopted in 1936, specifies the maximum amount that the bank can lend for margins.
The amount that can be borrowed under the U Regulation has changed many times since the first acceptance of the policy. Since 2010, the maximum value of the loan for the purchase of shares for a margin has been set at 50 percent of the value of the shares at the time the loan is provided. The maximum loan is not affected if the margin stock decreases after the initial loan is issued. This regulation applies to banks and all other creditors who provide a loan secured by a margin supply.
The U regulation also requires that the transactions participants register and fill in the documentation. If loans exceed $ 100,000 (USD), banks are responsible for sending U-1, the Federal R Formby the Ezer Council. This form contains a "declaration of purpose" that outlines the purpose for which the loan will be used. Non -bank creditors are always obliged to obtain purposeful statements.
regulation states several exceptions to its maximum credit provision. For example, margins used exclusively for collateral do not apply to U regulation. Banks do not have to adapt when they issue loans to other banks, employee ownership plans or planned planners. The Regulation also allows banks to issue more loan if loans are only used for temporary securities or allow customers to cover unpredictable emergency expenses. Non -banking creditors are exempt if they release less than $ 200,000 in the quarter -secured margins or have less than $ 500,000 in a given quarter in a given quarter.
regulation u is designed to minimize risksKO, which has been accepted by customers whose loans are secured in a share. The aim of the regulation is to regulate the use of a technique called the "lever effect" in which the borrowed capital is used to finance investments. This regulation has appeared as a result of the adoption of the T regulation, which regulates a loan issued by brokerage companies and sellers and has been issued secure gaps that remained open to the previous regulation.