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Agencies warn banks of risks in bank-owned life insurance

US financial regulators (the Agencies) have released a joint statement warning financial institutions that the purchase and risk management of bank-owned life insurance (BOLI) must be consistent with safe and sound banking practices.

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The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision said that while BOLI can be a useful product to recover costs associated with providing employee benefits, some institutions have invested a significant amount of capital in BOLI without an adequate understanding of the full array of risks it poses.

"In addition to credit and interest rate risks, BOLI exposes

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