Tips on Bank Board Engagement During Crises

In a recent client bulletin, executives from Promontory, an IBM Company, identified several immediate and medium-term actions bank boards should take once they have invoked crisis management protocols.

Immediate:

  • Insist on action-oriented updates from management, not information that has to be extensively analyzed and digested.
  • Where appropriate, credibly challenge management actions and proposals and help management strategically identify other possible actions needed.
  • Receive updates on actions taken under the business continuity plan and information on key operations.
  • Ensure that management maintains frequent contact with regulators. Consider having one or more directors occasionally participate in the discussions to hear directly from the regulators.

Medium Term:

  • Begin preparing to guide management in dealing with ripple effects on bank balance sheets and for institutions to continue serving the needs of customers, stakeholders and financial system counter parties.
  • Know the financial vulnerabilities the bank faces and support management with strategic decisions related to shoring up portfolio losses and constructing forbearance programs as needed.
  • Establish parameters and identify circumstances under which management may approach or exceed risk limits, and review and approve significant individual exceptions.
  • Maintain focus on consumer protection obligations and compliance vulnerabilities that could result from operational failures.
  • Require that management develop a recovery plan to permit the firm to return to business as usual, aligning with identified long-term effects of the current environment.
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About Author

Debra Cope

Debra Cope is editor-in-chief of ABA Banking Journal Directors Briefing.