Regulators’ New Focus On Director And Officer Liability Insurance; Other Considerations

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The Federal Deposit Insurance Corporation (the “FDIC”) issued an advisory statement on October 10, 2013, titled “Director and Officer Liability Insurance – Policies, Exclusions, and Indemnification for Civil Money Penalties.”

The advisory statement recommends that directors be well-informed about Directors & Officers (“D&O”) insurance and also be mindful of whether the policy contains “regulatory exclusions.” Although this is good advice in general, it is also self-serving for the FDIC. If an institution is closed by the FDIC, the existence of a regulatory exclusion cuts off one source of recovery for the FDIC and thus limits the ability of the FDIC to recover funds from the bank’s directors and officers post-resolution.

Originally Published in Missouri Independent Bankers Association Director's Supplement - February 2014.

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