FDIC Chairman Gruenberg Discusses Role of Bank Directors
FDIC Chairman Martin J. Gruenberg spoke at the American Association of Bank Directors. His speech focused on the role of bank directors in promoting the safety and soundness of the banking system.
Chairman Gruenberg stated that bank directors are tasked with overseeing the framework of objectives, policies and risk limits within which a bank's executive officers operate, in addition to monitoring the extent to which those executive officers comply with applicable laws and regulations. In addition, he explained, the FDIC's expectations for directors are based on "basic common sense principles," including those to be found in the Pocket Guide for Directors and the "Statement Concerning the Responsibilities of Bank Directors and Officers."
Chairman Gruenberg emphasized that bank directors play a critical role in overseeing the corporate governance of banks, and that they must remain engaged and well informed regarding strategic risks taken by the bank. He noted that the failures of many financial institutions were traced to management that engaged in new or expanded business lines without "adequate planning, controls, and understanding of the risks related to the new activity."