OCC’s indemnification proposal falls short of helping bank directors defend themselves against actions and claims
The comment letter submitted by AABD urges the OCC to discard the unreasonable limits it has placed on indemnification for bank directors of national banks and federal savings associations.
The proposed regulations authorize OCC to second guess a bank board’s decision to indemnify a director even if the board acted in good faith and consistent with its fiduciary duties. This could result in a director having to reimburse the bank for all of the funds used in the director’s defense.
OCC could reverse the good faith judgment of a board board simply by determining that the indemnification was not “reasonable” or was not “safe or sound” – terms not defined in the proposed regulation or in statutes. OCC will have the authority to define those terms in its discretion.
Bank boards are facing huge challenges in combating the effects of the downturn in the economy caused by the impact of COVID-19. Now is the time for the OCC to support bank boards, not put them at greater risk of personal liability.