The Financial Institutions Regulatory and Interest Rate Control Act of 1978 (FIRIRCA) gave the FDIC and OCC authority to prospectively assess civil money penalties (CMPs) against BOTH banks and individuals (IAP’s Institution Affiliated Persons).  tiered penalties have been established:

  • Tier One:  $5,500 per day may be assessed for most violations

  • Tier Two:  $27,500 per day for a violation, reckless, unsafe or unsound practice or breaches a fiduciary duty that is part of a pattern of misconduct and causes more than minimal loss to the institution or results in a pecuniary gain to such party

  • Tier Three:  The lessor of $1,100,000 or 1% of total assets may be assessed if a violation, unsafe or unsound practice, or breach of fiduciary duty is knowingly committed and causes a substantial loss to the institution or a substantial pecuniary gain to the violator

Click here for additional information.



Yes. The issue that should trouble them relative to CMP’s is that they are brought against the trustees, directors and officers individually, and regulators are becoming more aggressive in using them.

Civil Money Penalties can be brought while banks remain open, and penalties can be assessed for “any violation of law, rule or regulation. IAP’s have the right to due process (i.e. hearings), but there are attending costs associated with defense as well.

The dollar cost of civil money penalties can range from very small amounts to millions. A statistical review of CMP activity indicates that most assessments range from $500 to about $30,000 against IAP’s. Much higher penalties have been issued in the most egregious cases. Here’s some profile data …


  •  1,300+: OCC has filed approximately 1300 CMP’s since 1991

  •  76% of OCC CMPS’s settled for $10,000 or less

  •  92% of OCC CMPS’s settled for $30,000 or less



Both the FDIC and OCC have clearly expressed the written point that insurance coverage or indemnification to pay for fines and penalties must be excluded from bank insurance policies and indemnification agreements.


The issue with civil money penalties insurance under the banks D&O policy is Part 359 of the FDIC Regulations. This provision prohibits banks from providing insurance policies that cover civil penalties. Translated, that means the FDIC can prohibit insurers from paying coverage for civil penalties, even if banks have coverage the address this section,

The typical D&O policy excludes civil money penalties coverage. There are a few exceptions under which insurers offer coverage to qualified banks, but there are issues notwithstanding:

  • $0 Cost Approach: Insurers claim that no additional premiums are charged for CMP

    Issue: Regulations do not appear to sanction this approach because CMP coverage is included in the bank’s insurance contract. FDIC officials make no distinction between the bank paying premium for coverage directly or director’s reimbursing the bank for the corresponding bank cost. Regulators will frown on any D&O insurance contracts with CMP provisions.

  • Separate premium charges for each director/officer: Under this scenario, insurers require that the bank collect premium from each director, creating the appearance that they pay for their own CMP coverage.

    Issue: Existing regulations do not clearly sanction this approach, because CMP coverage remains part of the bank’s insurance contract, not a director’s or officer’s individual policy of insurance.



A low-cost insurance policy issued directly to the IAP -  Director, Trustee, or Officer - would avoid the integration and linking issues described in the previous section. A study is currently being conducted towards development of a product that addresses this gap and exposure in conventional coverage. If you’d like to be amongst the first to obtain breaking details on this products release, add your name to our proprietary and confidential subscription list by clicking the link below to register.

Please Keep Me Informed