Academic journal article ABA Banking Journal

Directors, Officers Highly Concerned about Willetts Case Outcome

Academic journal article ABA Banking Journal

Directors, Officers Highly Concerned about Willetts Case Outcome

Article excerpt

Bank directors and officers are universally concerned about the potential for personal liability in the business decisions they make, an issue at stake in the case of FDIC v. Willetts currently on appeal in federal courts.

According to an ABA survey, almost two-thirds of respondents said they were "very concerned" and another third said they were "somewhat concerned." Eighty-four percent said that changes to personal liability would make them less willing to serve as a director or officer in the future. Lawsuits from regulators over business decisions would affect willingness to serve as a bank director or officer for 92 percent of respondents--the leading cause for worry.

For banks, these concerns have affected director and officer recruitment more than retention. One in five said they have had difficulty retaining directors over these concerns, while 40 percent said a candidate had declined a director or officer role at their bank for these reasons.

In the case at hand, the FDIC is appealing a federal judge's ruling rejecting its legal case against the directors and officers of a failed North Carolina community bank by challenging the business judgment rule, a longstanding legal principle that protects directors and officers from personal liability for decisions made in good faith and according to a rational process. …

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