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Bank Board Accountabilities

Sound Board Committee Structure for the Community Bank

By: Debbie L. Meyers, Senior Consultant, Bank Strategies LLC

November 2013

The community bank must establish a board structure that supports sound corporate governance and comprehensive oversight. One of the best ways to meet this challenge is to consider the opportunities that exist in committee design and composition.

Most community banks have committees that address key operational functions, typically including an executive committee, audit committee, ALCO committee, and loan committee. Other committees can be established for special responsibilities—for example, a compensation committee or investment committee, among others. In most cases, the composition for each committee—with the exception of the audit committee, which will be addressed in a future article—can include both representatives of the board and active management. Not only do these committees provide the board the ability to delve deeper into various bank functions, but committee membership can also provide the added benefit of allowing individual directors to become more familiar with their bank’s day-to-day management.

To support and effectively manage the committee structure, the board needs to ensure each commit-tee has a clear understanding of its mission and responsibilities, which is often included in a committee charter.* Moreover, each committee needs to prepare minutes for its meetings, documenting the extent of their review and decision-making. Ultimately, these minutes should be provided to the full board, supporting the findings and the extent of the review of the committee, and offering any recommendations to the full board for consideration and approval.

While a committee structure can allow for the board to provide for a more in-depth review and understanding of bank operations and oversight, directors need to be mindful that the full board remains responsible for overall bank performance, risk management and controls. Therefore, the full board must be attentive to individual committee actions, conclusions and decisions.

*To receive a sample committee charter, email your request to Debbie@bankstrategiesllc.com 

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