Professional liability claims by the FDIC against bank directors and officers peaked in 2013 and are expected to decline further, FDIC Chairman Martin Gruenberg told a conference of bank directors today. The FDIC authorized 40 claims in 2014 and 20 last year, filing suit in approximately 29 percent of the 510 bank failures from 2007 to 2014.
Unlike the aftermaths of previous banking crises, D&O claims are no longer the focus of FDIC professional liability investigations, Gruenberg added. He said that more than half of the agency’s recoveries for professional liability came from residential mortgage-backed securities claims.
Gruenberg also highlighted areas of rising risk that the agency is observing, such as strategic risks from reaching for yield or entering new lines of business in pursuit of revenue. “The FDIC expects its supervised institutions to have a strategic planning process to guide the direction and decisions of management and the board,” he said. “I want to stress the word ‘process’ because we don’t just mean a piece of paper.” He also discussed the importance of cybersecurity.