A. It is unlawful for a state bank to pay a fine or penalty imposed by law upon any other person or any judgment against such person or to reimburse directly or indirectly any person by whom such fine, penalty or judgment has been paid, except:

(1) in the settlement of a bank's own liability or in connection with the acquisition of property against which a judgment is a lien;

(2) if provided in its articles of incorporation, a bank may indemnify its directors, officers and employees for expenses, fines, penalties and judgments reasonably incurred in actions to which the directors, officers or employees are parties or potential parties by reason of the performance of their official duties. The provisions of this paragraph shall not allow the indemnification of directors, officers or employees of a bank against expenses, penalties or other payments incurred in an administrative proceeding or action instituted by an appropriate bank regulatory agency, which proceeding or action results in a final order assessing civil money penalties or requiring affirmative action by an individual in the form of payments to the bank; and

(3) if provided in its articles of incorporation, a bank may acquire and pay the premiums for insurance covering the liability of its directors, officers or employees, except that the provisions of this paragraph shall exclude insurance coverage for a formal order assessing civil money penalties against a bank director, officer or employee.

B. In accordance with his supervisory responsibilities, the director may, in his discretion, review the threat to bank safety and soundness posed by any indemnification or proposed indemnification of directors, officers or employees by a bank or for the consistency of any such indemnification with the standards adopted by that bank in its articles of incorporation. Based upon this review, the director may direct a prospective modification of a specific indemnification by a bank through appropriate administrative action.

History: 1978 Comp., § 58-1-82, enacted by Laws 1995, ch. 190, § 12.

Repeals and reenactments. — Laws 1995, ch. 190, § 12, repeals former section 58-1-82 NMSA 1978, as enacted by Laws 1963, ch. 305, § 70, relating to unlawful payment of penalties and judgments against others including directors and officers, and enacted a new section, effective June 16, 1995.

Am. Jur. 2d, A.L.R. and C.J.S. references. — 9 C.J.S. Banks and Banking §§ 8, 9.