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Bahr Consultants

Protecting Yourself as a Bank Director

There is a Far Side cartoon that has two deer standing next to each other. One of them has what looks like a shooting target on his chest. The other deer says, “Dude, bummer of a birthmark.” Many bank directors these days are feeling like that deer with the target birthmark. If anything goes wrong with the bank, the persons whose stock value diminishes are going to be looking to the directors and bank management to make it right.

WHAT IS A DIRECTOR’S RESPONSIBILITY?

Every director is required to exercise ordinary diligence in ascertaining the condition of the bank and provide “reasonable control and supervision” of the bank’s business. Directors are also responsible for the supervision and direction of the bank under their charge, and they are not to indulge in self-dealings at the expense of stockholders. Directors are also required to be familiar with statutes, both state and federal, that pertain to the activities of their bank. They should be familiar with the loan limitations as to the bank’s capital, federal laws concerning community reinvestment, and EPA requirements on real property collateralized loans.

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