Federal Reserve Board Issues Enforcement Actions with Former Institution-Affiliated Parties of Nano Financial Holdings, Inc. and Nano Banc
November 12, 2024
Washington, D.C. – The Federal Reserve Board (FRB) on Tuesday announced enforcement actions against two former institution-affiliated parties (IAPs) of Nano Financial Holdings, Inc. and Nano Banc (collectively, Nano).
The actions stem from an investigation into Nano’s lending practices and the parties’ roles in alleged misconduct that led to the company’s failure.
Enforcement Actions
1. ** Suspension Order against Garland Maxwell**
Garland Maxwell, the former CEO of Nano, has been suspended from further participation in the financial industry for 10 years. The FRB found that Maxwell violated the Federal Reserve Act and Regulation O by:
- Engaging in unsafe and unsound lending practices
- Making materially false and misleading statements to the FRB
- Ignoring or misleading the FRB about risk management concerns
2. ** Cease and Desist Order against Dennis Hayes**
Dennis Hayes, the former Chief Financial Officer of Nano, has been issued a cease and desist order for violating Regulation O. The FRB found that Hayes:
- Failed to establish and implement adequate internal controls for lending activities
- Failed to ensure that Nano’s capital levels were adequate
- Failed to report material weaknesses in Nano’s financial reporting
Background
Nano Financial Holdings, Inc., a bank holding company based in Raleigh, North Carolina, and its subsidiary, Nano Banc, failed in 2023. The FDIC estimated the cost to the Deposit Insurance Fund was approximately $2.2 billion.
The FRB’s investigation found that Nano’s lending practices were highly risky and contributed significantly to its failure. The parties involved failed to properly assess the creditworthiness of borrowers, made imprudent lending decisions, and disregarded regulatory guidance.
FRB’s Statement
“The Federal Reserve is committed to ensuring the safety and soundness of our financial system,” said Governor Michelle Bowman. “These enforcement actions demonstrate that we will hold individuals accountable for their roles in misconduct that harms financial institutions and the public.”
Implications
The FRB’s actions send a strong message to financial institutions and their executives that unsafe and unsound lending practices and regulatory violations will not be tolerated. The suspensions and cease and desist orders serve as a reminder of the importance of compliance and risk management.
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