Which regulation outlines the credit extended by banks for the purpose of purchasing or carrying margin stock?

The regulation that outlines the credit extended by banks for the purpose of purchasing or carrying margin stock is Regulation U. This regulation is specifically designed to govern the extension of credit by banks and other lending institutions to enable the purchase or carrying of margin securities. Regulation U is a part of the broader set of regulations stemming from the Securities Exchange Act, which also includes Regulation T (pertaining to credit extension by brokers and dealers).

By setting forth requirements for banks regarding how much credit can be extended for margin purchases and laying down guidelines for ensuring that lenders adhere to safe lending practices, Regulation U serves to limit the risks associated with margin loans. It establishes the framework for compliance by financial institutions when such credit is extended to individuals or entities purchasing securities on margin.

In contrast, the other regulations listed pertain to different aspects of banking and securities law. Regulation O deals with extensions of credit to executives of the bank; Regulation W pertains to transactions between a bank and its affiliates; and Regulation X governs the use of credit for purchasing or carrying margin stock, but primarily from the perspective of creditors, not banks directly. Thus, Regulation U is the correct choice regarding the provision of credit for the purchase or carrying of margin stock.