The Federal Reserve Board has fined Maryland-based EagleBank $9.5m for violating the board’s insider lending regulation.
It claims that the bank ‘improperly extended credit to entities owned or controlled by its then-CEO and chairman Ronald D. Paul.’
The Board states that it found EagleBank had deficient internal controls over insider lending practices between 2015 and 2018. This allowed the bank to extend credit totalling nearly $100m to entities Paul owned or controlled, including certain family trusts, without making appropriate disclosures to, or obtaining required approvals from, a majority of the bank’s board of directors.
These internal deficiencies also extended to the bank’s supervision of lending staff, it claimed, who permitted Paul to participate in matters where he had a conflict of interest.
The Board also cited EagleBank for third-party risk management deficiencies over the same period that resulted in inadequate oversight of contracts between the bank and a local government official.
In addition to this, the Board announced that it has permanently barred Paul from employment in the banking industry and assessed a $90,000 fine against him for his central role in the bank’s violations of law and unsafe and unsound practices.
In line with these actions, the US Securities and Exchange Commission has announced its own settlement of actions against Paul and EagleBank’s holding company, Eagle Bancorp. In total the bank and holding company will pay around $22.9m and Paul will pay around $521,00 to settle agency actions.
The board had previously barred EagleBank’s former general counsel Laurence E. Bensignor from for his role in Eaglebank’s unsafe and unsound lending practices.
Earlier in the week, the US Federal Reserve Board issued the final guidelines that establish a transparent, risk-based and consistent set of factors for Reserve Banks to use when reviewing requests to access Federal Reserve accounts and payment services.
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