5 comments on “Bank Director :: FDIC Lawsuit Targets Directors at Failed Banks and Thrifts; TARPS Uncertain Legacy

  1. In the OCC Bank Director’s Handbook is a description of 8 risks that bank directors are to monitor and adequately address. In addition to all the obvious like credit risks, excessive growth, etc., one of those risks is called “Reputation Risk” arising from negative public opinion. It seems to me this risk was never addressed at Citizens. It’s pasted below from the handbook.

    “REPUTATION RISK”: The risk to earnings, capital, or enterprise value arising from negative public opinion. This risk affects the bank’s ability to establish new relationships or services or continue servicing existing relationships. This risk may expose the bank to litigation or financial loss, or impair its competitiveness or ability to attract or retain funding or capital. Reputation risk exposure is present throughout the bank and requires management to exercise an abundance of caution in dealing with customers, investors, and the community.

    Yes, the reputations of the bank’s staff, officers, and directors do matter.

  2. I would like to know how the premiums for PNBC’s Directors & Officers liability insurance have trended over the past few years. This is a question for the annual meeting. My guess is, they won’t tell us, because it is embarrassing to them.

    The D&O premiums are paid by the stockholders, so we have every right to know. And, our premiums are paying for past and future negligence on the part of the directors and officers. Such insurance policies are typically written on a “claims made” basis – the insurance only pays off if it is in place when the claim is made, not back when the negligence was committed. This might be something that present and former directors and officers should keep in mind – you might be protected only by a policy that is yet to be bought (or not bought)!

    • Or maybe, check to see if your homeowners’ personal liability insurance coverage will protect you. Hint – forget it.

  3. My guess is that when it’s too little, too late and FDIC comes in and the bank is placed into receivership by ILL Dept. of Banking, they will put in a claim on the D&O insurance for certain.

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