WASHINGTON — The Federal Reserve Board became the second regulator in just over a month to hit Nano Banc with a cease-and-desist order stemming from the Irvine, California, bank's failure to comply with earlier enforcement actions.
In a 15-page enforcement order dated Jan. 18, the Fed demanded that the embattled bank commit to wide-reaching changes in its compliance practices. The order focused in large part on improving oversight of loans to bank executives and the need for the bank to fill significant openings on its leadership team.
The $1.2 billion-asset Nano Banc has been beset by compliance woes since early 2021, when California’s Department of Financial Protection and Innovation issued an order requiring it to bolster its capital and reduce the concentration of its commercial real estate loans.
Nano Banc ran afoul of that order late last year, when it replaced several board members and appointed new leadership
Much of the Federal Reserve’s order zeroed in on Nano Banc’s lack of oversight around “insider transactions,” an umbrella term that refers to
The bank’s leadership will have 30 days from Jan. 18 to submit a plan to regulators to bolster compliance and “strengthen the Bank’s internal controls related to financial transactions between the Bank and senior executives, directors, and/or any entities which they control,” according to the order.
The cease-and-desist order will also require Nano Banc to hire an independent third party to review two aspects of the bank’s compliance practices: the oversight of its insider transactions and the adequacy of its compensation governance, policies, procedures and internal controls.
Once in place, the third party will “conduct a review of all extensions of credit between insiders and the bank … that have occurred within the two-year period” prior to the order’s effective date.
That review, according to the Fed’s order, will identify all the bank’s insider extensions of credit, analyze whether the transactions were made on preferential terms and assess whether Nano performed due diligence before approving the extensions of credit.
The Fed also said the review may extend to “additional time periods as directed by the Reserve Bank, including but not limited to any loan or personal expense paid to an insider through a corporate credit card.”
The Fed presented a shorter, 10-day timeline for the bank to put in place a new executive leadership team, noting that it is currently “without a permanent Chief Executive Officer, and Chief Financial Officer, and a sufficient number of board members, which are vital to the safe and sound operations of the Bank.”
The order was signed by Mark Troncale, listed as the current president of Nano Banc.
Nano Banc did not immediately respond to a request for comment.
