More (Though Not New) Thoughts on Bank Civil Money Penalties Insurance

A client asked about my knowledge of the history of civil money penalties against bank board members. The question was prompted by a note I sent about AmTrust’s CMP insurance policy.

My Reply:

CMP against banks seems to be mostly for issues of lack of flood insurance on loan collateral that is in flood areas. CMP against directors is exceedingly rare, I think. I’m not aware of an instance in the past ten years where CMP was assessed other than when a bank failed, and then only when the directors repeatedly ignored the orders of the regulators. This is not a coverage I would buy if I sat on your board. You are strong and well-managed. My guess is that you have a strong relationship with your regulators. A strong, conservative, diverse, independent, educated board focused on the best interests of the bank seems to me to be the best assurance that regulators will not issue CMP.

Related… I found this book to be very interesting, http://amzn.com/1480216550, on the topic of regulators going after banks.

The other book by David also gave me great insight – http://amzn.com/149270136X.

I hope this helps. Glad to talk if you like.

Scott