On October 3, 2023, the Federal Deposit Insurance Corporation (“FDIC”) proposed standards for corporate governance and risk management for the institutions it regulates that have $10 billion or more in total assets (“Proposed Standards”).[1] The Proposed Standards would establish extensive and rigid requirements for a wide range of state-chartered banks.[2] Further, they would reverse decades of reliance on state law for establishing governance and oversight obligations. The FDIC board approved issuing the Proposed Standards by a 3-2 vote with Vice Chairman Travis Hill and Director Jonathan McKernan issuing dissents sharply critical of the proposals.[3]
The Proposed Standards lean toward a rules-based approach to corporate governance, in contrast to the principles-based approach that is prevalent under state law. Critics will observe that the Proposed Standards are presented as “good corporate governance” without appreciating that what is “good” for one bank may not be “good” for another and that achieving “good corporate governance” results not from uniform regulatory mandates but from default rules that can be tailored and fiduciary duties that can be fit.
The FDIC…
