Loans

Fed orders Nano Banc to improve oversight of loans to executives

Fed orders Nano Banc to improve oversight of loans to executives
Written by Publishing Team

The Federal Reserve became the second regulator in just over a month to strike Nano Banc with a cease-and-desist order arising from California’s Irvine Bank’s failure to comply with previous enforcement actions.

In a 15-page execution order dated January 18, the Fed demanded that the embattled bank commit to widespread changes to its compliance practices. It focused in large part on improving loan oversight for the bank’s executives and the need for the bank to fill important job opportunities in its leadership team.

The $1.2 billion Nano Banc has been in compliance problems since early 2021, when the California Department of Financial Protection and Innovation issued an order asking it to boost its capital and reduce the concentration of its commercial real estate loans.

Nano Banc clashed with this arrangement late last year, when he replaced several board members and appointed new leadership without notifying the state, which led to a separate cease-and-desist order on December 15.

Much of the Fed’s order focused on Nano Banc’s lack of oversight over “inside transactions,” an umbrella term referring to Credit is granted to senior bank executivesIncluding the use of corporate credit cards.

The bank’s leadership will have 30 days from January 18 to present a plan to regulators to enhance compliance and “strengthen the bank’s internal controls relating to financial transactions between the bank, senior executives, managers and/or any entities they control.” According to the order.

The cease and desist order would also require Nano Banc to appoint an independent third party to review two aspects of the Bank’s compliance practices: the oversight of its internal transactions, the adequacy of compensation governance, and internal policies, procedures and controls.

Once the third party is in place, it will “make a review of all extensions of credit between the Insiders and the Bank… that occurred during the two-year period” prior to the effective date of the order.

That review, in accordance with the Fed’s order, will identify all of the bank’s internal credit extensions, analyze whether transactions were made on preferential terms and assess whether Nano performed due diligence before approving the credit extension.

The Fed also said the review could extend to “additional periods of time as directed by the Reserve Bank, including but not limited to any loan or personal expense paid to an insider through a company credit card.”

The Fed presented a shorter 10-day timetable for the bank to create a new executive leadership team, noting that it is currently “without a permanent CEO, CFO, and sufficient number of board members, which are vital to the safe and sound operations of the bank.”

The order was signed by Mark Troncale, who is listed as the current head of Nano Banc.

Nano Banc did not immediately respond to a request for comment.

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