Tips For Directors Of Troubled Institutions

The January 2012 failures of Tennessee Commerce Bank and BankEast, the first bank failures in the state in a decade, demonstrate that banks in Tennessee are not immune to the conditions that have caused the failure of over 420 banks in the United States since 2008. These failures act as a strong reminder for directors of banks, and particularly those serving troubled institutions, of actions they can take to limit their personal liability if their bank fails.

The directors of banks, like their counterparts in any corporation, can best defend against most claims by diligently fulfilling their obligations to the corporation and its shareholders. Much has been written of a director's fiduciary obligations – the duties of care and loyalty – and further discussion of these duties is beyond the scope of this article. However, by being actively engaged as a board member (reviewing materials distributed, regularly attending board meetings); actively participating in board