This booklet, compiled by the Nebraska Department of Banking and Finance (Department), is intended to aid members of the board of directors of a financial institution to better understand their duties and responsibilities. Thus the title, The Director: Duties and Responsibilities, was selected to be descriptive of an area that is of the utmost importance to every board member in every financial institution in Nebraska.
The booklet is designed for the newly selected director who often times is appointed without any formal training (although formal training is subsequently required) and learns the job by observation. It is written to help explain and clarify your supervisory duties, assist you in building confidence in your abilities, and to help eliminate confusion. It may also set out a new perspective to the experienced director in establishing a cohesive board and help to build able and active leadership. This booklet is not intended to address all of the issues and responsibilities assumed by a director.
To be an effective director, you must first understand that banks, trust companies, building and loan associations and credit unions are closely regulated. Accordingly, it is important that you understand your financial institution’s relationship to government regulations.
Second, you need to understand the relationship that exists between the board and its executive management. The board’s role is one of establishing goals and direction (planning) and formulating and monitoring financial institution policies, while management’s role is one of implementing such policies. The board manages the Chief Executive Officer (CEO). The CEO should not manage the board.
Third, you need to understand your functions and legal responsibilities. It is important that you perform your duties in a manner that avoids legal liability to you and your financial institution. Assure that detailed records of the board’s decision making process are maintained.
Finally, you need to evaluate the effectiveness of board policies in accomplishing your objectives. Goals need to be established and monitored on an ongoing basis to determine whether the objectives have been reached. Participation with executive management is important in the area of setting goals and objectives. This booklet, however, is not intended to be a legal reference. You should consult your financial institution’s legal counsel and your own attorney on matters requiring legal consideration.
The Department has the responsibility to examine your institution to enforce compliance with the laws, rules and regulations but it also is instructed by the Legislature to aid and assist your institution in maintaining proper banking standards and efficiency.
The staff of the Department devotes a considerable amount of time answering questions and providing information. They may be contacted at P.O. Box 95006, Lincoln, NE 68509-5006 or via telephone at (402) 471-2171. Information, regulations, staff contacts, and forms are available on the Department website, https://ndbf.nebraska.gov/. This article may be viewed in its entirety by going to the Department's website and clicking on the "Publications and Brochures" tab.