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Question: We have a problem commercial loan with a small corporation. We really think that the president of the company should be replaced. How far can we go to shake up management?
Answer: Whoa! Not very far. Don't forget the lessons of the Farah case. There, the bank got too involved in management and lost a lender liability suit, which claimed that the management put in by the bank had harmed the company. Also, don't slander this person. Your better angle is to review the bank's loan agreement with this borrower and make sure that you are getting regular financial statements, evaluating the position, and monitoring the collateral. If the company isn't meeting criteria in the loan agreement, then you could bring that up with the company, but do NOT try to make management decisions.
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