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Director's Book: Role of Directors for National Banks and Federal Savings Associations

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Director's Book: Role of Directors for National Banks and Federal Savings Associations November 2020 IRECTOR’S BOOK Role of Directors for National Banks D and Federal Savings Associations IRECTOR’S BOOK Role of Directors for National Banks D and Federal Savings Associations Office of the Comptroller of the Currency November 2020 Director’s Book Role of Directors for National Banks and Federal Savings Associations i Contents Preface ..........................................................................................................1 OCC’s Bank Supervision Organizational Structure ...............................3 Midsize and Community Banks ..........................................................3 Large Banks ........................................................................................4 Trust Banks .........................................................................................4 Full-Scope, On-Site Examination Requirement and Supervisory Activities ...................................................................... 5 OCC’s Risk-Based Supervision Approach................................................7 Regulatory Ratings ..............................................................................8 Communication ...................................................................................8 Appeals Process ................................................................................10 Resources ...................................................................................................12 OCC Resources .................................................................................12 Other Resources ................................................................................12 Corporate Governance .............................................................................14 Board’s Role in Corporate Governance ............................................14 Board Composition, Qualifications, and Selection ......................15 Leadership Structure of the Board ...............................................18 Outside Advisors and Advisory Directors ....................................18 Board and Board Committee Meeting Minutes ...........................19 Access to Senior Management and Staff ......................................20 Director Orientation and Training ................................................21 Board Compensation ....................................................................22 Board Tenure ................................................................................22 Board’s Responsibilities ...............................................................22 Provide Oversight ....................................................................24 Establish an Appropriate Corporate Culture ...........................25 Code of Ethics .........................................................................26 Comply With Fiduciary Duties and the Law ...........................27 Select, Retain, and Oversee Management ...............................28 Succession Planning ................................................................30 Oversee Compensation and Benefits Arrangements ...............31 Incentive Compensation ..........................................................32 Employee Benefits ...................................................................33 Maintain Appropriate Affiliate and Holding Company Relationships .......................................................34 Establish and Maintain an Appropriate Board Structure .........35 Perform Board Self-Assessments ............................................36 Office of the Comptroller of the Currency Director’s Book ii Role of Directors for National Banks and Federal Savings Associations Contents Oversee Financial Performance and Risk Reporting ..............37 Support Efforts to Serve Community Credit Needs ................39 Individual Responsibilities of Directors .......................................39 Attend and Participate in Board and Committee Meetings .....39 Request and Review Meeting Materials ..................................40 Make Decisions and Seek Explanations ..................................41 Review and Approve Policies .................................................41 Exercise Independent Judgment ..............................................42 Planning .....................................................................................................43 Strategic Planning .............................................................................43 New Activities ..............................................................................45 Capital Planning ................................................................................46 Operational Planning .........................................................................47 Disaster Recovery and Business Continuity Planning .................48 Information Technology and Information Security ......................48 Recovery Planning ............................................................................49 Risk Governance .......................................................................................51 Risk Culture ......................................................................................52 Risk Appetite .....................................................................................53 Risk Management System .................................................................54 Identify Risk .................................................................................57 Measure Risk ................................................................................57 Monitor Risk ................................................................................57 Control Risk .................................................................................58 Risk Assessment Process ..............................................................58 Policies .........................................................................................59 Processes ......................................................................................59 Personnel ......................................................................................60 Control Systems ...........................................................................61 Quality Control ........................................................................61 Quality Assurance ...................................................................62 Compliance Management System ...........................................62 Bank Secrecy Act/Anti-Money Laundering Program .............64 Audit Program .........................................................................65 Management Information Systems ..............................................67 Third-Party Risk Management .....................................................68 Insurance ......................................................................................69 Insurance Record Keeping ......................................................70 Board’s Role in Risk Governance .....................................................70 Office of the Comptroller of the Currency Director’s Book Role of Directors for National Banks and Federal Savings Associations iii Contents Enforcement Actions and Supervision of Problem Banks ...................72 Enforcement Actions ........................................................................72 Enforcement Actions Against Banks ...........................................72 Enforcement Actions Against Individuals ....................................78 Civil Money Penalties ..................................................................80 Other Actions Against Banks or Individuals .....................................82 Supervision of Problem Banks ..........................................................83 Conservatorship and Receivership ...............................................84 Appendixes.................................................................................................85 Appendix A: Board of Directors Statutory and Regulatory Requirements ........................................................85 Appendix B: Regulations Requiring Board Approval for Policies and Programs .............................................................89 Appendix C: Common Board Committees .......................................95 Appendix D: Common Types of Insurance .....................................102 Indemnification Agreements ......................................................102 Directors’ and Officers’ Liability Insurance ...............................103 Fidelity Bond ..............................................................................104 Bank-Owned Life Insurance ......................................................105 Specialized Bank Insurance .......................................................105 Appendix E: Glossary .....................................................................108 Appendix F: Abbreviations .............................................................110 References ................................................................................................111 Office of the Comptroller of the Currency Director’s Book Role of Directors for National Banks and Federal Savings Associations 1 Preface The Office of the Comptroller of the Currency (OCC) charters, regulates, and supervises all national banks and federal savings associations1 (collectively, banks). The OCC’s mission is to ensure that banks operate
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