AGO 86-1.

Case Date:January 07, 1986
Colorado Attorney General Opinions 1986. AGO 86-1. January 7, 1986Department of Law Attorney General Opinion FORMAL OPINION of DUANE WOODARD Attorney General Opinion No. 86-1 AG Alpha No. RG BA AGAOV Wellington E. Webb Executive Director Department of Regulatory Agencies State of Colorado 1525 Sherman Street, Room 110 Denver, CO 80203 RE: Fidelity bond coverage requirements for state chartered commercial banksDear Mr. Webb: This opinion letter is in response to your November 12, 1985 memorandum requesting a formal attorney general opinion about the need for blanket bond coverage for state chartered commercial banks. QUESTION PRESENTED AND CONCLUSION Your request for an attorney general's opinion presents the question: May a state chartered commercial bank continue to operate if its blanket bond is cancelled and its efforts to procure blanket bond coverage continue in the negotiation stages beyond the expiration date of the original blanket bond? Yes, a state chartered commercial bank may continue to operate if its blanket bond is cancelled. While the Colorado bank commissioner and the Colorado banking board have discretion to determine whether operating without fidelity insurance is an unsound banking practice and therefore have discretion to subject the bank to regulatory action, including closure and involuntary liquidation, there are no statutes or regulations which require an extreme measure such as closure for operating without fidelity insurance. ANALYSIS Section 11-3-120, C.R.S. (1973), mandates that the directors of a state commercial bank require fidelity bond coverage for the officers and employees of the bank. The directors are required to determine the amount of the bond with the approval of the state bank commissioner: 11-3-120. Fidelity bonds and other insurance. (1) The directors of a state bank shall require good and sufficient fidelity bonds on all active officers and employees, whether or not they draw salary or compensation, which bonds shall provide for indemnity to such bank on account of any losses sustained by it as the result of any dishonest, fraudulent, or criminal conduct by them acting independently or in collusion or combination with any person. Such bonds may be in individual, schedule, or blanket form, and the premiums therefor shall be paid by the bank. (2) The said directors shall...

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