Building A Bank Board for Success

January 2015

Building A Bank Board for Success

So how can banks recruit candidates? The Fed’s Cynthia L. Course offers some advice for the nominating committee in her article, “Recruiting and Retaining Bank Directors:”

  • Determine the skills and demographic profiles of your current directors, then compare them with the bank’s strategic objectives and risk profile. Identify gaps and look for candidates to fill them.
  • Sell potential director candidates on the benefits of membership, such as networking in the industry.
  • Be willing to have honest discussions about the bank, and how the candidate can add value. Be sure, however, not to disclose confidential information, such as the bank’s CAMELS composite, without written permission from regulators.
  • Build a competitive compensation package.
  • Assure candidates that they will receive proper training and liability insurance.   

Once new directors join the bank, the board must work fast to make sure that directors are ready to do the job. Course again offers some pointers:

  • Develop an orientation program that includes meetings with the head of each business line, other board members and key outsiders, such as bank lawyers, auditors and regulators.
  • Make available exam and audit reports.
  • Provide director training materials and opportunities, such as newsletters, retreats and trade group meetings.
  • Be sure management is transparent about all aspects of the bank.
  • Give accurate, timely and sufficient information to all board members so they can make informed decisions. 

How to Assess Personal Liability

AABD president David Baris, a Washington, D.C. bank lawyer, has conducted personal liability assessments for bank directors to minimize risk. He said in an October speech that bank directors should make sure that:

  • Board minutes are sufficient to support the decisions being made.
  • Board and committee reports are detailed and
  • Written policies are realistic.
  • Directors should also:
  • Understand their D&O policies, including exclusions.
  • Avoid approving individual loans.
  • Make sure to avoid conflicts of interest and self-dealing.
  • Include indemnification provisions or liability limitations in bank articles or bylaws.