The Illinois Banking Act provides that every director or officer who violates the Act’s lending or investment limits, or participates in or assents to a violation, is personally liable for consequential damages sustained by the bank, its shareholders, or any other person. As explained in an Illinois appellate court decision, the director or officer need only “have some personal involvement” in the violation to be held liable.

However, the bank’s shareholders may exempt directors and officers from personal liability by a vote of at least two-thirds of the outstanding bank stock, provided that the waiver of liability is subject to certain conditions enumerated in the Act. In addition, a director or officer will not be personally liable if the loan or other transaction was in compliance when made “in good faith” and became a violation “solely because of a subsequent reduction” in the bank’s unimpaired capital or unimpaired surplus.

Needless to say, the Secretary of the IDFPR also has very broad powers to issue orders and civil money penalties against any person found to be in violation of the provisions of the Banking Act or the IDFPR’s rules.

For resources related to our guidance, please see below:

• Illinois Banking Act — 205 ILCS 5/32 (general lending limit provisions)

• Illinois Banking Act — 205 ILCS 5/39 (individual liability for violations of lending or investment limits)

• Illinois Banking Act — 205 ILCS 5/48(6)(b), 48(8) and 48(9) (issuance of orders and civil money penalties against banks and individuals for violations of laws and rules)

• Colchester State Bank v. McIntyre, 577 N.E.2d 897, 899 (3rd Dist. 1991) (Illinois court decision holding that a director or officer does not have to knowingly violate the lending rules; “some personal involvement” in the violation is enough to be held liable)