Civil Monetary Penalties and the Gap in Bank D&O Coverage
Fall 2014
by Daniel J. Beck |
“While this is not a new issue, the FDIC thought it was important to remind banks in Financial Institution Letter 47-2013 that they cannot indemnify or pay for insurance policies which pay claims for civil monetary penalties assessed against a bank’s instituion-affiliated parties or “IAPs” (which generally includes officers, directors and controlling shareholders). In the letter the FDIC also made it clear that there is no exception from this restriction for banks that pay for such insurance, but are reimbursed by the IAP for the policy expense. This had become a common workaround that banks used to provide such coverage for their officers and directors, but it is now clearly prohibited.”
Note: The above is an excerpt from the article published in the Fall 2014 issue of Arkansas Community Banker. Click the link below to read the actual publication.