Topic: Bank Governance
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Are there any restrictions preventing us from hiring one of our directors (a real estate attorney) to perform legal services for the bank? The attorney-director would be helping us with a business loan. Payment to the attorney-director would be bona fide and paid in the usual course of the bank’s business. Our internal policies do not have any restrictions in this area.
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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…
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Are banks in Illinois allowed to use consent agendas for board meetings? A consent agenda allows a board to group routine business items, which have been provided in advance for the board’s review, into one agenda item for approval.
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Yes, we believe that Illinois banks may utilize consent agendas for board meetings. We are not aware of any Illinois or federal law, rule or guidance prohibiting the board of directors of a bank from using a consent agenda to vote on routine business matters that have been grouped together for approval. Consequently, provided the…
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Is there a retention period for bank policies that have been approved by our board and signed by an officer?
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Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021. Please note that this change may affect the continued accuracy of this guidance as it pertains to the ECSA. We are not aware of any mandatory retention period for original drafts of board-approved bank…
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Is there a regulation that prohibits bank employees from accepting gifts from clients over $25.00? We have such a prohibition in our employee handbook, but we wanted to confirm whether any regulation established a dollar amount.
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No, we are not aware of any federal or Illinois law or regulation that establishes a specific dollar limit on gifts from clients to bank employees. The limit is driven by your bank’s internal ethics policy. Federal criminal law imposes stiff penalties on bank employees who accept anything of value “to be influenced or rewarded…
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We are a state-chartered bank with a holding company. Are there any federal or state regulations restricting our ability or our holding company’s ability to pay dividends on our stock?
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The Federal Deposit Insurance Act generally prohibits FDIC banks from banking capital distributions, including dividend distributions, if the distribution would result in the institution becoming undercapitalized. Additionally, after a bank receives notice from the FDIC that it is considered undercapitalized, it is subject to restrictions on capital distributions. The Illinois Banking Act also appears to…
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Our trust department has a trust committee that holds regular meetings. The committee has hired an attorney to attend committee meetings to serve as a “trust consultant” on issues facing the committee. Does this create a conflict of interest for our bank? Should we disclose this relationship in our meeting minutes? The attorney is not a member of the committee and has no voting privileges. However, he is compensated for attending the meetings, as are all committee members. His suggestions sometimes lead us to hire him for legal work. We want to be sensitive to potential conflicts, but he is one of the only expert trust attorneys in this geographic area, and our committee values him as a consultant.
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In our view, using the attorney as a “trust consultant” by itself does not pose a problem for your bank, provided that he continues to refrain from the trust committee’s voting process. However, because the attorney also provides legal advice on individual trust matters for the bank, we believe that he could (and perhaps should)…
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Are we required to notify the IDFPR or the Federal Reserve Board regarding new directors or changes in key management positions? What notices are required to change our corporate headquarters?
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In general, you do not need to notify your state or federal regulator regarding a new director or a change in key management personnel. However, there are some instances when prior notice is required, such as when the new director or manager is obtaining control of the bank, your bank is not in compliance with…
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What are best practices when a key executive officer or member of management resigns? Are there conflict of interest issues or security options?
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Your primary federal regulator, the FDIC, has released helpful guidance on succession planning and filling vacancies for both management and directors, and we link to those resources below. In addition, the OCC has issued guidance on succession planning, and the FFIEC’s IT examination handbook includes an appendix on business continuity and succession planning. If the…
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Our bank’s board secretary has requested a medical leave of absence for several months. Should the board appoint an acting secretary who can sign board minutes and any other documents during her absence?
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Yes, we believe it would be prudent to appoint an acting secretary to serve during the secretary’s absence. Under Illinois law (and probably your corporate bylaws) the secretary to a bank’s board of directors is required to sign many important documents, including board resolutions and board minutes, which should not be left unsigned during the…
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Are Illinois banks still required to list an officer as the cashier?
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No, we do not believe that Illinois-chartered banks are required to have a cashier. The Illinois Banking Act requires only that a bank’s board of directors “elect one of their number as president.” 205 ILCS 5/12(a)(2). Otherwise, banks may “appoint such officers as the by-laws may provide.” 205 ILCS 5/12(a)(4)