Insider Activities

Reputation Risk

The board and management must act at all times in a manner that maintains the bank’s reputation for honesty and integrity. Real or perceived insider abuse can severely affect a bank’s ability to continue to do business in a profitable manner. When a bank is closely associated with an insider or a company owned by an insider (even if they do not transact business together), the bank may suffer loss of business or other harm if the insider or the insider’s business experiences financial difficulties or receives adverse publicity. Any damage to a bank’s reputation, or any implication of insider abuse or fraud, may dramatically affect the opinion of the bank’s shareholders, customers, suppliers, and financial partners, and may result in a loss of confidence in the bank. In turn, the bank’s customer base could erode, materially affecting the bank’s earnings and capital.

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