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FDIC Enforcement Decisions and Orders

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{{5-31-95 p.TC-310}}
[15,986] Docket No. FDIC-93-207b (3-24-95)

In the Matter of

THE BOSTON BANK OF
COMMERCE

BOSTON, MASSACHUSETTS
(Insured State Nonmember Bank)
MODIFICATION OF THE ORDER TO CEASE AND DESIST

   The Boston Bank of Commerce, Boston, Massachusetts, ("Bank"), having been advised of its right to a Notice of Charges and of Hearing ("Notice") detailing the unsafe or unsound banking practices alleged to have been committed by the Bank of its right to a hearing on such alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1818(b)(1), prior to the issuance of the ORDER TO CEASE AND DESIST dated October 5, 1993, Docket No. FDIC-93-207b ("ORDER"), and having been advised of its right to receive a Notice detailing the FDIC's factual support which forms the basis for modifying the ORDER, and of its right to a hearing on such alleged charges under section 8(b)(1) of the Act, 12 U.S.C. § 1818(b)(1), and Part 308 of the FDIC's Rules of Practice and Procedures, 12 C.F.R. Part 308, and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated March 14, 1995, whereby solely for the purpose of this proceeding and without admitting or denying any unsafe or unsound banking practices, the Bank consented to the issuance of an MODIFICATION OF THE ORDER TO CEASE AND DESIST ("MODIFICATION") by the FDIC.
   The FDIC accepted the CONSENT AGREEMENT and hereby modifies the ORDER as follows:
Paragraph 1 is hereby stricken, and in its stead is inserted the following:
   1. (a) Within ninety (90) days from the effective date of this MODIFICATION, the Bank shall have and retain qualified management. Each member of management shall have qualifications and experience commensurate with his or her duties and responsibilities at the Bank. The qualifications of management shall be assessed on its ability to:

       (i) comply with the requirements of this ORDER,
       (ii) operate the Bank in a safe and sound manner,
       (iii) comply with applicable laws and regulations, and
       (iv) restore all aspects of the Bank to a safe and sound condition, including asset quality, capital adequacy, earnings, management effectiveness and liquidity.
During the life of this ORDER, the Bank shall notify the Regional Director of the FDIC's Boston Regional Office ("Regional Director") and the Commissioner of Banks for the Commonwealth of Massachusetts ("Commissioner") in writing of any changes in management at the level of Senior Vice President and above. The notification must include the names and background of any replacement personnel and must be provided prior to the individual's assuming the new position.
   (b) By April 1, 1995, the Board of Directors shall develop a written analysis and assessment of the Bank's manage- {{5-31-95 p.TC-311}}ment and staffing needs ("management plan"), which include, at a minimum:
       (i) identification of both the type and number of officer positions needed to manage and supervise properly the affairs of the Bank;
       (ii) identification and establishment of such Bank committees as are needed to provide guidance and oversight to active management;
       (iii) evaluation of each Bank officer, and in particular the chief executive officer, and loan officers to determine whether these individuals possess the ability, experience and other qualifications required to perform present and anticipated duties, including adherence to the Bank's established policies and practices, and maintenance of the Bank in a safe and sound condition; and,
       (iv) a plan of action to recruit and hire any additional or replacement personnel with the requisite ability, experience and other qualifications, which the Board of Directors determines are necessary to fill Bank officer or staff member positions consistent with the Board's analysis, evaluation and assessment as provided in paragraphs 1(b)(i) and 1(b)(iii) of this ORDER.
   (c) The written management plan shall be submitted to the Regional Director and the Commissioner for review and comment by April 1, 1995. No sooner than thirty (30) days, but under no circumstances more than sixty (60) days after such submission, the Board of Directors shall approve the written management plan, taking into consideration any regulatory comments, and such approval shall be recorded in the minutes of the Board of Directors. Subsequent modifications to the written management plan may be made only after giving the Regional Director and the Commissioner written notice of the proposed modification, and after consideration of any responsive comments submitted by the Regional Director and/or the Commissioner within thirty (30) days from their receipt of the notice of proposed modification. No such modification shall be come effective until approved by the Board of Directors, and such approval shall be recorded in the minutes of the Board of Directors. The Bank, its directors, officers and employees shall implement and follow the written management plan and/or any subsequent modification thereto.
       (d) (i) The written management plan shall also include the requirement that the Board of Directors of the Bank, or a committee thereof not less than a majority of whose members are independent with respect to the Bank, provide supervision over lending, investment and operating policies of the Bank sufficient to ensure that the Bank complies with the provisions of this ORDER.
       (ii) At the next meeting of the shareholders of the Bank, following January 31, 1995, and at each succeeding meeting of the shareholders at which Bank directors are to be elected, the member of the Board of Directors who are also shareholders shall nominate and support the election of candidates to the Board of Directors who are independent with respect to the Bank, in such number as is necessary to cause a majority of the Board of Directors to be and to remain independent with respect to the Bank.
       (iii) For purposes of this ORDER, an individual who is "independent with respect to the Bank" shall be any individual (1) who is not an officer of the Bank or any of its affiliated organizations and who does not own, directly or indirectly, more than five (5.0) percent of the outstanding shares of the Bank, (2) who is not related by blood, marriage or common financial interest to an officer of the Bank or to any stockholder owning, directly or indirectly, more than five (5.0) percent of the Bank's outstanding shares, and (3) who is not indebted to the Bank, directly or indirectly (including the indebtedness of any entity in which the individual has a substantial financial interest), in an amount exceeding five (5.0) percent of the Bank's total equity capital and allowance for loan and lease losses.
   (e) The Bank's Board of Directors shall meet at least monthly. The Board shall prepare in advance and shall follow a detailed written agenda at each meeting, which shall include consideration of actions of any committees. A chronological file of all written agendas shall be maintained. Notwithstanding the foregoing, the Board shall not be precluded from considering matters other than those contained in the agenda. Detailed written minutes of all Board meetings shall be maintained and recorded on a timely basis.
{{5-31-95 p.TC-312}}
   Following the effective date of this MODIFICATION, the Bank shall send to its shareholders a description of this MODIFICATION (1) in conjunction with the Bank's next shareholder communication, and also (2) in conjunction with its notice or proxy statement preceding the Bank's next shareholder meeting. The description shall fully describe the MODIFICATION in all material respects. The description and any accompanying communication, statement, or notice shall be sent to the FDIC, Registration and Disclosure Section, Washington, D.C. 20429, for review at least twenty (20) days prior to dissemination to shareholders. Any changes requested to be made by the FDIC shall be made prior to dissemination of the description, communication, notice, or statement.
   This MODIFICATION shall become effective immediately upon its issuance.
   The provisions of this ORDER as modified by this MODIFICATION shall be binding upon the Bank and its institution-affiliated parties.
   This MODIFICATION has been reviewed and concurred in by the Commissioner.
   The provisions of this ORDER as modified by this MODIFICATION shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this ORDER shall have been further modified, terminated, suspended, or set aside by the FDIC.
   Dated at Westwood, Massachusetts this 24th day of March, 1995.
   Pursuant to delegated authority.

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