Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve System, and Consumer Financial Protection Bureau, Department of the Treasury – Enforcement Actions and Professional Liability Claims Against Institution-Affiliated Parties and Individuals Associated with Failed Institutions. Report Numbers, EVAL 14-002, 2014-SR-B-011, OIG-CA-14-012. July 2014

“As discussed in our report, the Regulators have established formal processes for investigating and imposing EAs on IAPs whose actions harmed institutions, and the FDIC has done the same for investigating and pursuing PLCs. During the 5-year period from 2008-2012, 465 institutions failed. As of September 30, 2013, the Regulators had issued 275 EAs against individuals associated with 87 of those failed institutions, and the FDIC had completed 430 PLCs and had an additional 305
pending a final result—many pertaining to directors and officers—based on litigation or negotiation. The report contains seven recommendations intended to strengthen the FDIC, FRB, and OCC’s programs for pursuing EAs and the FDIC’s program for pursuing PLCs and to address factors that appeared to impact the Regulators’ ability to pursue such actions. Of the seven recommendations, two were applicable to all three agencies, one was applicable to the FRB and OCC, and four were applicable to the FDIC. Regarding EAs, we recommended that the:

• FDIC, FRB, and OCC further examine methodologies to support EAs that permanently ban from banking, those individuals whose actions harmed financial institutions based on a willful or continuing disregard for the safety or soundness of the institutions;
• FDIC, FRB, and OCC address differences in how they notify each other when initiating EAs;
• FDIC consider the use of cease and desist orders against individuals as an additional enforcement tool to address safety and soundness issues; and
• FDIC issue written guidance on the issuance and publication of letters to individuals who were convicted of certain crimes.

Regarding PLCs, we recommended that the:

• FDIC research ways to make institutions more aware of, and mitigate the impact of, exclusions in financial institutions’ insurance policies that prevent or attempt to prevent the FDIC, as Receiver, from recovering on PLCs;
• OCC and FRB inform their regulated institutions about the risks related to insurance policy exclusions;
• FDIC provide more institution-specific information about PLC expenses and recoveries to members of its Board of Directors.”