Banks are specifically defined legal entities that play a unique and vital role in the nation’s financial system. Because of that role and their acceptance of insured deposits, banks are subject to an extensive system of supervision and regulation. Ensuring the bank complies with all applicable laws and regulations is an important dimension of your job as a director.

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One word of caution before we move on. Directors are typically asked to serve on a board by the bank’s chief executive officer (CEO). That often engenders some allegiance to that CEO; however, it is important to remember that management works for the board of directors, not the other way around. It is equally important for both the board and management to understand this concept.