There has been a growing number of cases where the Feds have gone after Bank insiders for breach of fiduciary duty. Examples include Haven Trust Bank, Heritage Community Bank, Wheatland Bank of Naperville, Corn Belt Bank & Trust, Integrity Bank, First Centennial Bank, and others.
Every bank compliance officer is well aware of this risk, as are a growing number of senior bank executives and directors. However, in addition to the normal risk management, Bankers should consider the whole breadth of lapses in fiduciary duty obligations they may be exposed to.
For example, is it feasible for the Fed to city breach of fiduciary duty when a Bank clearly fails to improve its financial position by failing to grow and improve profitability? Sound far-fetched? Do you think that the insiders at Haven Trust, Wheatland Bank, Corn Belt Bank & Trust, and First Centennial Bank thought that any legal action against them would have been far fetched? Yes, now they are spending tens if not hundreds of thousands of dollars to defend themselves, and fighting off the smear to their character and reputations. Don’t risk the same fate for your insiders.
Better yet, don’t allow your Bank to get to a point where you need to worry FDIC takeover. In addition to prudent lending standards, position your Bank on the course of growth and profitability by focusing your organization on the customer segments that will allow you to be profitable!
Use your internal resources AND leverage the capabilities of 3rd parties who are able to propel your growth and profitability. Require vendors to guarantee your success to tying their fees to your bottom line success.