Navigating the Liability Minefield: Guidance for Officers and Directors of Troubled Banks

November/December 2011Articles paBanker

With bank failures and enforcement and civil actions by regulators at all-time highs, directors and officers of FDIC-insured banks must be more vigilant than ever to avoid potential exposure.

Bank regulators may commence an enforcement action to remove an individual from a regulated institution and assess civil monetary penalties. To prevail, the regulator must prove that the institution-affiliated party: (1) violated the law or regulation, participated in an "unsafe or unsound banking practice," or breached a fiduciary duty; (2) caused loss to the bank or gain to the individual by reason of such action or omission; and (3) the action or omission demonstrates personal dishonesty or demonstrates willful or continuing disregard for the safety and soundness of the bank.

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