Letter to Banks – Re – Wells Fargo

As we see the events against Wells Fargo unfold, it seems to be getting worse by the moment.  Class action suits by shareholders, employees and customers, clawbacks on executive pay, investigations by regulatory agencies and more to come, I’m sure.

As an insurance agent who has been insuring and advising directors and officers of financial institutions for over 30 years, I ask myself how much is this all going to cost?  Who will be paying the legal bills, settlements and fines?

As a director or officer, you may be asking, could this happen to our bank?  If so, how could this affect me personally?  We expect regulators will be looking closely at your employee incentive policies and possibly other types of compensation plans.

I recommend a few things:

  • Review the corporate indemnification agreement. Are there any gaps that may leave you without corporate protection?  If the regulators are looking for a clawback on pay, would the indemnification agreement cover it?
  • Will your Directors and Officers Liability insurance (D&O) cover all the expenses? There could be some exclusions that may bar coverage.  Are your limits adequate?  Peer Data may not be the best guide when selecting the level of coverage you may need.  How would the policy respond to fines or penalties?
  • There are additional insurance policies that can cover personal liability like Excess Side A Directors & Officers Liability policy, and specific policies to pay Civil Money Penalties.

I would like to have an opportunity to discuss this with you and answer any questions you may have.  I look forward to receiving your call.

Francis J. Scully, III (JOE)

President

E-mail: joes@fgib.com

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