Know the risks - Zurich

Statutory and regulatory dutiesIn addition to the common law duties discussed above, federal and state statutesand regulations impose further obligations and limitations upon directors andprovide means for supervising and enforcing those requirements. The following setsforth an overview of the most prevalent duties and requirements imposed upondirectors by those statutes and regulations:Qualifications and restrictions on board membershipUnlike other institutions, directors of national banks must meet certain eligibilityrequirements, including citizenship and residence. 19 Upon appointment orelection, a director of a national bank must take an oath that he or she will“diligently and honestly” administer the affairs of the bank and that he or shewill not “knowingly violate or willingly permit to be violated” any provision ofthe National Bank Act. 20 Independent of the common law duties of directors, thisoath requires a director of a national bank to take steps to ensure that the bankobserves applicable laws and regulations.Various provisions of federal law further prohibit or restrict bank directors from servingas directors or officers of other types of institutions or otherwise regulating suchrelationships. 21 For instance:• Except in certain limited circumstances, no director or officer of any member bankof the Federal Reserve System may be at the same time a director or officer of anyother bank organized under the National Bank Act or state law. 22• Federal law prohibits a director of any depository institution with assets exceeding$2.5 billion from serving as a director of any other nonaffiliated depositoryinstitution having assets exceeding $1.5 billion. 23• There are statutory restrictions on interlocks between depository institutions in thesame geographical area. 24• Individuals who have been convicted of any criminal offense involving dishonestyor a breach of trust may serve as bank directors only with prior FDIC approval. 25In addition, many states impose other requirements for directors of statecharteredinstitutions.Heightened duties and liabilities for depository institutions19 12 U.S.C. § 72.20 Id.21 For example, 16 U.S.C. § 825(b) (publicutilities), 15 U.S.C. § 79q(c) (public utilityholding companies), and 15 U.S.C. § 80a-10(c)(investment companies).22 15 U.S.C. § 19.23 12 U.S.C. § 3203.24 12 U.S.C. § 3202, et seq.25 12 U.S.C. § 1829.A director of a depository institution may be personally liable under 12 U.S.C. §93 for violations by a bank or its officers, agents or employees of the provisionsof the National Bank Act, if the director participates in or permits such violations.This potential statutory liability is in addition to any civil liability for any breach by adirector of his common law duties. Even so, a bank director does not automaticallybecome an insurer against all losses suffered in connection with an unlawful actof the bank. In order for a bank director to be personally liable under 12 U.S.C. §93, the director must “knowingly violate, or knowingly permit any of the officers,9Financial institutions guide