The American Association of Bank Directors (AABD) has sent a letter to Sheila C. Bair, chairwoman of the Federal Deposit Insurance Corp. (FDIC), requesting that bank executives be allowed to maintain copies of records that they may need in their defense against possible lawsuits if the FDIC closes their institutions.
‘Unless directors have maintained, off-bank premises, records of the decisions they made prior to the bank's failure – such as board and committee minutes, records of loans or policies and procedures approved by the board, examination reports and outside expert reports such as audit reports and outside loan reports – they are effectively prevented from defending the actions they took as directors,’ according to the AABD.
David Baris, executive director of AABD, cited the savings-and-loan crisis of the late 1980s as an example of the legal problems created by denying bank directors access to records. ‘The Resolution Trust Corp. and FDIC often would depose directors before a lawsuit was filed without providing the directors with an opportunity to review the record,’ he said. ‘We can't let that travesty happen again.’
Baris also faulted the FDIC's position that banks should not pay for the defense of their directors against potential lawsuits by FDIC as receiver. ‘This position singles out bank directors from directors of all other corporations, who, under state corporate statutes and the corporations' articles of incorporation and bylaws, may be entitled to have their legal fees paid for by their corporations,’ he said. ‘Bank directors don't like the FDIC's stance, and the industry runs the risk of losing some good bank directors.’