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Overdraft Limit for Employees

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Our bank has limited the number of overdrafts an employee may have in a rolling 11 month period. Management now would like to treat employee like other bank depositors and eliminate the limit. Are there any compliance concerns with this action? My initial comment was that employees of a bank should be held to a higher standard as the general public is entrusting their funds in the integrity of the bank's staff. Thoughts?

Regulatory concern - make sure no Reg O Executive Officers are included in the overdraft program. Reg O prohibits a bank from paying overdrafts of an executive officer (other than defined "inadvertent" overdrafts).

Operational risk - not subjecting employees to a higher standard regarding management of their finances could lead to missing seeing an employee having financial difficulties and therefore at higher risk of fraud or embezzlement, especially when combined with access to funds.

Reputation risk - should it become know that you don't hold employees to a high standard for management of finances, that could be a ding to your reputation.

First published on 06/21/2020

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