This article describes potential sources of personal liability for directors of banking organizations that arise from federal banking laws and regulations, including as a result of common law causes of action, enforcement actions by federal regulators and statutory causes of action.
Private equity and hedge fund investment in the banking sector has increased with the prospect of obtaining superior returns as the economy recovers and asset values improve. While some sponsors and investors are seeking to control banking organizations,1 accepting the regulatory burdens imposed on the industry, others more typically seek to Structure their investments to avoid the acquisition Of "control" of the bank or bank holding company in order to avoid becoming entities regulated by the Federal Reserve Board of Governors of the Federal Reserve System (the "FRB") pursuant to Ihe Bank Holding Company Act. In either case, controlling and non-controlling investors may find themselves in a position to appoint members to the board of directors of banking organizations in which they are invested....
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