One of the great lines in Steven Spielberg’s recent movie about the Cold War era, “Bridge of Spies,” occurred in a tense courtroom when Tom Hanks’ character leaned over to his controversial client and asked, “Do you never worry?”

The client responded unemotionally, “Would it help?”

In the changing and uncertain landscape for bank directors, which has been made even more interesting following the 2016 presidential election, many may be wondering whether worrying really helps at all. Maybe the answer for these effective bank directors is to do so “in moderation” and “about the right things.”

One guidepost for effective governance is looking at what motivates FDIC litigation against bank officers and directors when it steps in as receiver of a failed institution. Generally, there are three broad categories of board conduct that trigger FDIC action:

  • Dishonest conduct and approving/condoning abusive insider transactions (Regulation O violations are common allegations made against former officers and directors);
  • Safety and soundness violations, including the bank’s failure to comply with applicable laws, regulations, internal policies, and agreements already in place with regulators; and
  • Either not establishing or not following proper underwriting policies.

Insider Transactions

How do we effectively monitor the bank’s compliance with Regulation O? Are we attuned to any other conflicts of interest among directors, as well as independence issues, and can we trust that directors will not use the information they learn in the boardroom to advantage themselves or their families and friends unethically or illegally? Do we insist on the confidentiality of all matters discussed there?

Record of Meetings

Do the minutes of our meetings accurately reflect the board’s discussions and actions? Are they distributed to members prior to the next meeting with enough time for review? Minutes may be reviewed by a court and jury if the bank or its directors are sued, and well-drafted minutes will reflect the process used by the directors to inform themselves and follow their legal duties (information-gathering, deliberation, and decision-making), but will probably not reflect the minutiae of their discussions or will simply be a script of who-said-what.

Board Composition

Is our board comprised of active, engaged participants? Do we understand what our primary regulator expects of us as directors? Do our directors broadly understand the bank’s regulatory landscape and how the bank effectively manages risk? Do we have an expectation for complete, accurate, and competent management presentations to the board? Is anyone on the board asking harder questions until an issue is made fully understandable and any problem areas are addressed to the director’s satisfaction? Are the majority of our directors independent and recruited for their relevant business, industry, or financial expertise? Have we established a suitable committee structure, consistent with the bank’s size and operational complexity, including a robust independent audit function reporting directly to the board?


Are we vigilant about the “tone at the top” to ensure that the chief executive and senior management lead with (and insist on) integrity, high ethical standards, transparency, professionalism, and legal compliance? Is senior management open to challenging discussions about strategy and execution, or does management bristle when asked hard questions? Do we have an updated management succession plan?

Director Liability Protection

Do the bank’s charter and bylaws indemnify our directors to the fullest extent allowed by law? Is there a separate indemnification agreement for directors? Is the directors’ and officers’ liability insurance coverage adequate?

And ultimately, it’s not just all about the board of directors, because the bank’s overall culture needs to attract and retain great people, board members, executive management, and employees alike. The bank’s board should always keep front and center what Warren Buffett famously said: “In looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don’t have the first, the other two will kill you.”