Topic: Board of Directors (BOD)
-
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.
—
by
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…
-
Are there any restrictions against allowing two or more members of the same family to serve as voting directors on community bank boards in Illinois?
—
by
We are not aware of any restrictions on members of the same family simultaneously serving as voting directors on a community bank board, provided they are duly elected or appointed. We do recommend exercising caution regarding loans to directors or corporations in which the directors have a controlling interest when such loans require board approval…
-
In addition to the language contained in our deposit account agreement, should a bank’s deposit account closing standards be approved by the board of directors? If so, how often should this be approved?
—
by
We are not aware of any specific rules that require a bank’s board of directors to pre-approve the bank’s policies and procedures with respect to closing deposit accounts. However, since directors generally are charged with the duty to establish and monitor a bank’s policies, we recommend ensuring that your board is made aware of any…
-
Is there a retention period for bank policies that have been approved by our board and signed by an officer?
—
by
Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021.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…
-
When calculating whether an extension of credit to a bank director requires board approval, do we consider the total amount available on a line of credit or the amount drawn on a line of credit? For example, if a director has been approved for a $250,000 line of credit, but has not yet taken a draw, do we use the $250,000 availability to determine whether board approval is required?
—
by
If your bank has made a binding commitment for the whole amount of the $250,000 line of credit and does not retain a right of refusal for draws on the line, then your bank should use the entire $250,000 amount to determine whether board approval is required. As you have indicated, Regulation O imposes limitations…
-
Does the Federal Reserve Act’s restriction on deposit account interest for bank directors and officers apply to state, non-member banks? Are there any Illinois laws that address preferential interest for “insiders”?
—
by
No, we do not believe that the deposit account interest rate restriction in the Federal Reserve Act applies to state, nonmember banks. Section 376 of the Federal Reserve Act provides that “no member bank shall pay to any director, officer, attorney, or employee a greater rate of interest on the deposits of such director, officer,…
-
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.
—
by
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)…
-
We made a loan to a company in which one of our bank’s executive officers holds a controlling interest. However, the executive officer is not obligated on the loan in any way. We understand that the loan is subject to the restrictions on loans to bank insiders under Regulation O. But is the loan also subject to Regulation O’s specific restrictions on loans to executive officers?
—
by
No, the loan to the corporation controlled by the executive officer is not subject to Regulation O’s specific restrictions on loans to “executive officers.” However, you are correct that the loan would be subject to all of Regulation O’s restrictions on loans to “insiders.” Under Regulation O, the definition of “insider” means any executive officer,…
-
A bank employee recently was promoted to an executive officer position. Two years before her promotion, she obtained a home equity line of credit (HELOC) from our bank for $250,000. The HELOC was approved for any purpose, so we consider it an “other purpose” loan under Regulation O. Do we need to modify the HELOC to conform with Regulation O’s $100,000 limitation on “other purpose” loans to executive officers? Or is the HELOC “grandfathered” because it was extended before she became an executive officer? Will her future draws on the HELOC require prior board approval? Will this HELOC count toward her aggregate Regulation O limit?
—
by
No, we do not believe that you need to modify the preexisting HELOC to conform to the $100,000 “other purpose” loan limitation for executive officers. The OCC and FRB long have taken the position that “the requirements of Regulation O apply at the time a loan or extension of credit is made.” We reached out…