Director Candidates: What You and the Bank Board Need to Know
One of the keys to nominating and electing qualified bank directors is for both the board and prospective director to assure that the prospective director understands the responsibilities of serving as a bank director, including the character and financial condition of the bank.
A Working Group of AABD’s Task Force on Mitigating Personal Liability of Bank Directors has provided prospective bank directors with pointers on questions to ask before agreeing to join a bank board.
The Task Force consists of more than 50 highly experienced individuals who have served in high positions at one or more of the federal banking agencies and/or have advised numerous banks on bank examination, regulatory, and enforcement matters.
The Working Group is focused on how bank directors may minimize their risk of personal liability. For prospective directors, steps to minimize personal liability begin before they become directors.
There are four parts to the Guidance:
- Top ten topics to discuss in the due diligence process prior to acceptance of a board seat
- Top ten documents for review
- Top ten list of key provisions in D&O insurance policies
- Top ten due diligence risk indicators
The guidance is not intended to be all inclusive. The tips and suggestions regarding questions to ask, documents to review, and other considerations for prospective directors are a starting point. What is most relevant and important in any situation depends on the size, complexity, and profile of the organization, among other things. Due diligence should be tailored to the organization, and prospective directors and bank boards should review (with assistance as appropriate) the Guidance before implementation to determine how best to apply it and what else should be considered.
AABD has identified experienced bankers, former bank regulators, and bank consultants to support this effort on a bank by bank basis. Email David Baris at [email protected] for more information.
AABD also invites bank board members to join AABD’s Nominations Committee to help support banks’ efforts to attract the most qualified board candidates possible for their institutions.