We are not aware of any federal or state prohibitions against hiring a bank’s director to perform legal services for the bank — provided their fees are bona fide and paid in the usual course of business.

Federal law prohibits financial institutions from “corruptly” giving “anything of value” to directors in connection with their business but allows financial institutions to pay directors “bona fide salary, wages, fees, or other compensation . . . in the usual course of business.” The Illinois Banking Act also does not prohibit banks from hiring directors to perform certain services, although it does prohibit state banks from indemnifying directors from liability for certain breaches of fiduciary duty, including a director’s breach of loyalty to the bank or its shareholders or transactions from which a director derives an improper personal benefit.

Consequently, if you decide to hire your bank’s director, we recommend verifying that the rates charged for legal services are comparable to rates paid to other outside counsel you may hire, and you should ensure (and document) that the director is not involved in the hiring decision.

Additionally, if your internal policies and procedures do not address the hiring of directors, officers or employees to perform certain services, we recommend revising your “conflicts of interest” and “code of ethics” policies to address this scenario.

For resources related to our guidance, please see:

• Federal Criminal Code, 18 USC 215(a) (“Whoever (1) corruptly gives, offers, or promises anything of value to any person, with intent to influence or reward an officer, director, employee, agent, or attorney of a financial institution in connection with any business or transaction of such institution; or (2) as an officer, director, employee, agent, or attorney of a financial institution, corruptly solicits or demands for the benefit of any person, or corruptly accepts or agrees to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business or transaction of such institution; shall be fined not more than $1,000,000 or three times the value of the thing given, offered, promised, solicited, demanded, accepted, or agreed to be accepted, whichever is greater, or imprisoned not more than 30 years, or both, but if the value of the thing given, offered, promised, solicited, demanded, accepted, or agreed to be accepted does not exceed $1,000, shall be fined under this title or imprisoned not more than one year, or both.”)

• Federal Criminal Code, 18 USC 215(c) (“This section shall not apply to bona fide salary, wages, fees, or other compensation paid, or expenses paid or reimbursed, in the usual course of business.”)

• Illinois Banking Act, 205 ILCS 5/39 (“[A] State bank may establish that a director is not personally liable to the bank or its shareholders for monetary damages for a breach of the director’s fiduciary duty; provided, however, that such provision may not eliminate or limit the liability of a director for any of the following: (1) An act or omission that is grossly negligent. (2) A breach of the director’s duty of loyalty to the bank or its shareholders. (3) Acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law. (4) A transaction from which the director derived an improper personal benefit.”)

• FDIC Supervisory Insights, Special Corporate Governance Edition (April 2016, revised October 2018), page 13 (“The board should ensure that all major operational areas and activities are covered by clearly communicated policies that can be readily understood by all employees and that are appropriate for the bank’s size. The Pocket Guide indicates that specific policies should include, at a minimum: . . . Conflicts of interest  .  . . Code of ethics”)