A harshly worded federal and state regulatory cease-and-desist order requires First Asian Bank to stop "following unsafe and unsound banking practices," but the chief executive on Monday defended the bank’s strength.
"The bank is strong. The bank is not in trouble," said First Asian chief executive William Chu.
The Federal Deposit Insurance Corp. and Nevadan Financial Institutions Divison, however, directed First Asian to correct a long list of deficiences.
The banking regulators on Sept. 25 issued the order, noting that the bank consented to the order without admitting or denying the allegations. The FDIC made the order public on Friday.
At the time of the order, First Asian was operating without a chief executive, chief financial officer or a senior lending officer.
The order directed First Asian to fill the vacancies but it also criticized management for numerous alleged shortcomings.
The order alleged that First Asian’s management was following policies and practices that jeopardized the safety of deposits, was doing unsatisfactory loan underwriting and was posting operating losses.
The bank, according to bank regulators, had insufficient liquidity "in relation to the bank’s reputation risk in the community." Also, the FDIC and state banking division said First Asian maintained inadequate capital for the bank’s increased risk profile.
Yet, the bank’s 28 percent level more than satisfies the 11 percent capital level cited by regulators. In addition, the bank has no problem loans, according to its third-quarter financial report.
Regulators compalined that First Asian was posting an operating loss. The bank lost $1.6 million in the first nine months of 2008, according to a financial report.
The regulators also criticized the bank board, ordering the board to disband its special approval committee and bring all matters to the full board.
First Asian was directed to hire three independent directors within 90 days. First Asian was given 90 days to implement procedures for complying with the Bank Secrecy Act and Anti-Money Laundering regulations.
First Asian, which opened for business in Las Vegas in June 2007, has endured a battle over control of the board and lawsuits relating to that battle. The board ousted the chief executive at one point but later asked him to return.
In May, George Burns, commissioner of the financial division, issued another cease-and-desist order against First Asian, complaining that it was operating without a CEO and failed to notify him that the CEO had left. Burns also said that board members violated state law by disclosing information about a visit by the FDIC and division. The new order from both the FDIC and the state agency says First Asian violated the earlier cease-and-desist order.
"We’re working very hard on (the order)," said bank director James Chu. "We’re making very good progress."
Contact reporter John G. Edwards at firstname.lastname@example.org or 702-383-0420.