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#47392 - 12/06/02 05:01 PM Financial Institution Bond Insurance Policy
Scooter Offline
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Scooter
Joined: Sep 2002
Posts: 216
Michigan
I realize this is not a consumer compliance topic, so please advise if this question needs to be submitted elsewhere.

Regarding a financial institution's bond insurance, is such insurance required by regulation?

If not, does anyone know what stance an examiner would take if a bank did not purchase the Bond policy?

Thanks.

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General Discussion
#47393 - 12/06/02 05:16 PM Re: Financial Institution Bond Insurance Policy
Pale Rider Offline
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under the Lone Star
Blanket and surety bond regulations are typically written by state chartering authorities, not the federal banking regulators (at least not the FDIC). Here in Texas the requirements are promulgated by the state and only apply to state chartered banks and thrifts.
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#47394 - 12/06/02 05:22 PM Re: Financial Institution Bond Insurance Policy
BANNED BY BOL MANAGEMENT Offline
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BANNED BY BOL MANAGEMENT
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Posts: 524
Banks are required to maintain insurance coverage, based on an analysis of risk, so when the examiners come in they ask for a copy of all insurance coverage, e.g., D & O specifically, and expect to receive the Financial Institution Bond and General Liability policies. If you don't produce coverage, like the Financial Institution Bond, you are placed in the position of explaining your analysis of the risk with the result that no coverage is necessary. That means that you do not have exposure to employee dishonesty, loss of a cash letter is transit, Fraudulent Mortgages, Counterfeit Checks, Stop Payments, Check Kiting Fraud, Unauthorized Signatures, Forgery or Alterations, On/Off Premises ATM's, etc., etc.

Have you prepared "winning" talking points, supported by an analysis of risk? One big loss can bring down your bank, so coverage is necessary, if not required.

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#47395 - 12/06/02 05:46 PM Re: Financial Institution Bond Insurance Policy
Scooter Offline
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Scooter
Joined: Sep 2002
Posts: 216
Michigan
I thank both of you for your helpful responses.

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#47396 - 12/06/02 07:32 PM Re: Financial Institution Bond Insurance Policy
LiL Bit Moore Offline
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LiL Bit Moore
Joined: Nov 2002
Posts: 624
Texas
Here is the CFR governing fidelity insurance -

7.2013 Fidelity bonds covering officers and employees.
(a) Adequate coverage. All officers and employees of a national bank must have adequate fidelity coverage. The failure of directors to require bonds with adequate sureties and in sufficient amount may make the directors liable for any losses that the bank sustains because of the absence of such bonds.

Directors should not serve as sureties on such bonds.

(b) Factors. The board of directors should determine the amount of such coverage, premised upon a consideration
of factors, including:
(1) Internal auditing safeguards employed;
(2) Number of employees;
(3) Amount of deposit liabilities; and
(4) Amount of cash and securities normally held by the bank.



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