Section 8(i) - Civil Money Penalties (CMPs)
A bank's actions result in CMPs. These actions were knowingly committed and caused a substantial loss to the bank. The bank's asset size is $50M. How much would the CMP be?
$1,000M or 1% of total assets = $500
Know the FDI act section 8(i), Tiers for CMPs?
Purpose of CMPs?
c) remedial
CMPs are assessed not only to punish the violator according to the degree of culpability and severity of the violation, but also to deter future violations. Although relevant to the FDIC's interests, the primary purpose of utilizing CMPs is NOT to effect remedial action. Such action, in the form of restitution or other corrective measures, should be separately pursued.
CMPs may be assessed for the violation of:
Tier 2 up to $25M -- if party commits a violation, recklessly engages in unsafe and unsound practice or breached fiduciary duty more than minimal loss to bank or gain to party.
Tier 3 up to $1MM or 1% TA (whichever less) -- if violation or unsafe and unsound or breach of duty is knowingly committed and causes substantial loss to bank or gain to party.
CMPs on $50MM bank which knowingly committed violations?
$1MM
A bank director in a $100MM TA bank has been found to be involved in several willful violations that resulted in serious losses. What CMPs is the director subject to?
1) He is not subject, just the bank is
2) Only up to $1M or 1% of TA per day
4) Any amount needed for punishment
(3) Up to $1MM a day / Bank would be subject to $1MM a day or 1% of TA
What are CMP tiers?
According to Section 8 of the FDI Act, a tier system is established for CMPs:
Tier 1:
Penalty: Not more than $5M per day during which such violation continues.
Tier 2:
Penalty: Not more than $25M a day during which such violation continues.
Tier 3:
Penalty: Shall Forfeit & Pay up to the Maximum Amount.
Maximum:Person: $1MM a day
Bank: Lesser of $1MM day or 1% of assets
$$ goes to the U.S. Treasury, not the FDIC
Resignation, termination, or separation does not affect jurisdiction.
What are the CMP limits for a bank which knowingly committed violations which resulted in substantial loss to the FDIC (See Section 8 of FDI Act)?
Bank: Lesser of 1% of Total Assets or $1MM per day (Tier III CMP)
Person: Not to exceed $1MM per day
A bank has material errors in its Call Report. What CMPs are applicable?
1) 0
3) $5M
4) $1MM
Section 7 - Penalties for late call reports or false information:
Inadvertent - $ 2,000/day
Not inadvertent - $20,000/day
Knowing or reckless disregard - the lesser of $1,000M or 1% of total assets/day
All of the following are used for remedial corrective action except:
· 8(a)
13 Factors to be considered in determining whether CMPs should be imposed:
1) Evident violation or pattern of violations was intentional or committed with a disregard for the law or the consequences to the bank
2) The frequency or recurrence of violations and the length of time the violation has been outstanding
3) Continuation of the violation after the respondent becomes aware of it, or its immediate cessation & correction
4) Failure to cooperate with the agency effecting early resolution of the problem
5) Evidence of concealment of the violation, or its voluntary disclosure
6) Any threat of or actual loss or other harm to the bank, including harm to the public confidence in the bank, and the degree of such harm
7) Evidence that participants or their associates received financial or other gain or benefit or preferential treatment as a result of or from the violation
8) Evidence of any restitution by the participants in the violation
9) History of prior violations, particularly where similarities exist between those and the violation under consideration
10)Previous criticism of the bank for similar violations
11)Presence or absence of a compliance program and its effectiveness
12)Tendency to create unsafe or unsound banking practices or breach of fiduciary duty
13)The existence of agreements, commitments or orders intended to prevent the subject violation