ATTACHMENT 3 FEDERAL DEPOSIT INSURANCE CORPORATION, OFFICE OF CHIEF, DIVISION OF EXAMINATION, Washington, D.C., February 13, 1967. Memorandum to: Supervising Examiners, Federal Deposit Insurance Corporation. Subject: Bank Stock Loans and Bank Officer Loans. Arrangements have been made between the three Federal banking agencies to exchange information developed during the course of commercial bank examinations with respect to loans secured by the stock of other banks and loans made to officers of other banks. The attached Forms DE-24 and DE-25 are to be used in reporting your Examiners' findings to the appropriate Federal Reserve Bank in the case of a State member bank and to the Regional Comptroller of the Currency in the case of a national bank. Examiners-In-Charge should be instructed to attach a list of the subject loans and requisite supporting data to the pencil copy of the report of Examination, with the forms to be completed in the District Office and mailed to the Federal Reserve or Regional Comptroller, with a copy to this office and to the District Office correspondence file of the bank examined. If this procedure is not deemed practicable, a supply of forms may be included with the blank report pages at the start of an examination, to be filled out by the Examiner-In-Charge and mailed to the District Office with the completed report. In instances where completed forms involving the stock and officers of State nonmember insured banks are received in the District Office from the Federal Reserve Bank and Regional Comptroller, these should be filed in the correspondence file of the nonmember bank involved, with a copy sent to this office. The cut-off point for reporting these items will be left to the discretion of the Supervising Examiner, but a DE-24 should always be submitted in cases where the bank under examination holds in a collateral position 5% or more of the outstanding stock of another bank. Information as to the total amount of the other bank's outstanding stock can, of course, be obtained from Polk's or Rand McNally's bank directories. In instances where the bank under examination has made loans collateralled by the stock of another insured nonmember bank, or to an officer of another insured nonmember bank, the examiner should be instructed to submit the detailed information to the District Office, where it should be cross-referenced in the appropriate correspondence files and two copies sent to the Washington Office. A supply of these forms will be forwarded to the District Offices in the near future for implementation of the program and instructions should be issued to the field examiners relative to their use thereof. EDWARD H. DEHORITY, Chief, Division of Examination. *Include origination and maturity dates, endorsers, guarantors and security, if any, if indirect, so note. FEDERAL DEPOSIT INSURANCE CORPORATION, Memorandum To: All Insured Banks. The Federal Deposit Insurance Corporation has for some time been studying in detail Section 19 of the Federal Deposit Insurance Act (12 U.S.C. 1829), relating to the requirement for this Corporation's consent prior to any insured bank employing persons who have been convicted of crimes involving dishonesty or breach of trust. Section 19 provides as follows: "Except with the written consent of the Corporation no person shall serve as a director, officer, or employee of an insured bank who has been convicted, or who is hereafter convicted of any criminal offense invovling dishonesty or breach of trust. For each willful violation of this prohibition, the bank involved shall be subject to a penalty of not more than $100 for each day this prohibition is violated, which the Corporation may recover for its use." (Emphasis supplied) Since the enactment of this law in 1950, our Board has reviewed cases coming under it on an ad hoc basis and each case has been judged on its own merits according to the particular facts and circumstances involved. The need for guidelines and standards to be applied prospectively has increased in recent years. Inquiries continue to come in from banking institutions asking what standards should be applied by them in determining whether an application under Section 19 is required. In addition, programs are now underway on both the Federal and state levels to hire and retrain the hard-core unemployed some of whom may have criminal records, and the banking community will no doubt participate in these programs to some degree. For these reasons, the Board of Directors has adopted the following general guidelines and policies with respect to Section 19. It is our hope that these guidelines will be of assistance to all banks having questions concerning the applicability of our law, and that they will, at the same time, serve to insure the continuing stability and confidence in our banking system. I. STANDARDS TO BE APPLIED IN DETERMINING WHETHER AN APPLICATION FOR CONSENT IS REQUIRED UNDER SECTION 19 (A) There must be present a conviction of record. Arrests, pending cases not brought to trial, acquittals, or any conviction which has been reversed on appeal will be excluded from the requirements of Section 19. A conviction which is being appealed will require a Section 19 application until or unless otherwise reversed. (B) The conviction must be for a criminal offense involving dishonesty or breach of trust. Felonies as well as misdemeanors wherein dishonesty or breach of trust is involved are included within the definition. Dishonesty is defined to mean "to cheat or defraud for monetary gain or its equivalent, direct or indirect, or to wrongfully take from any person, property lawfully belonging to that person in violation of any criminal statute or code." Breach of trust is defined to mean a wrongful use, misappropriation, or omission with respect to any property or fund which has been lawfully committed to a person in a fiduciary capacity." (C) Youth Offenders.—Adjudgment by a court against a person as a "youthful offender" under any youth offender law or adjudgment as a "juvenile delinquent" by a family court or any other court having jurisdiction over minors as defined by state law will not require an application under Section 19. Such adjudications are not considered convictions for criminal offenses. (D) Adults and All Minors Convicted of Crimes.-The conviction of any adult or minor by a court of competent jurisdiction for any criminal offense involving dishonesty or breach of trust as defined in paragraph B above will require an application for consent prior to a bank's employment of that person. II. THE CORPORATION'S POLICY WITH RESPECT TO APPLICATIONS MADE UNDER SECTION 19 In considering any application made by an insured bank to employ a person who has been convicted of a criminal offense involving dishonesty or breach of trust, the factors to be considered will include but will not be limited to the following: (1) The specific nature of the offense involved and the circumstances surrounding it. |