What Directors Should Know About Bank Laws, Regulations

Under the CAMELS rating system, the capability of a bank's board and management is rated on the basis of a number of evaluation factors, one of which is "compliance with laws and regulations." To fulfill obligations respecting a bank's compliance with laws and regulations, it is important to have an understanding of the bank regulatory system. Next look at organizational alternatives for doing business. In addition to general oversight responsibilities, bank directors are often required to specifically approve certain things. Federal regulators, for example, have issued interagency guidelines on real-estate lending policies, which require the bank's board to review the bank's real-estate lending policies at least annually. Whenever specific board approvals are necessary, directors should make an effort to familiarize themselves with the law, regulation, policy statement or other issuance that requires it. Effective compliance must be a team effort, from the board down to the rank and file.