Fed Issues Action Against Lineage Financial Separate from Synapse Case

The Federal Reserve Board has announced an enforcement action against Franklin, Tennessee-based Lineage Financial Network, the bank holding company of Lineage Bank.

The Fed said in a Thursday (Dec. 19) press release that the Federal Deposit Insurance Corporation (FDIC) separately issued an enforcement action with Lineage Bank in January and that the Fed’s enforcement action is independent of the bankruptcy proceedings regarding Synapse Financial Technologies.

In the enforcement action announced Thursday, Lineage Financial Network (Lineage FN) and the Federal Reserve Bank of Atlanta have entered into a written agreement in which the board of directors of Lineage FN will ensure that the bank complies with any other supervisory action taken by its federal or state regulator.

The agreement also requires that the Lineage FN board maintain an adequate number of qualified directors, submit cash flow projections to the Reserve Bank, ensure the bank complies with rules around affiliate transactions, take a number of steps to promote capital conservation, ensure compliance with laws and regulations, and submit to the Reserve Bank written progress reports detailing the actions it has taken to comply with this agreement.

“Each provision of this Agreement shall remain effective and enforceable until stayed, modified, terminated or suspended in writing by the Reserve Bank,” the agreement said.

In the enforcement action separately issued by the FDIC in January, Lineage Bank consented to a number of requirements outlined by that agency.

“With the stipulation, the Bank has consented, without admitting or denying any charges of unsafe or unsound banking practices relating to its Third-Party Risk Management Program and its Financial Technology (‘FinTech’) partners, to the issuance of this Consent Order (‘Order’) by the FDIC,” the FDIC’s consent order said.

In the separate issue regarding Synapse, which was mentioned in the Fed’s press release, Lineage Bank is one of the four banks at which Synapse opened demand deposit accounts on behalf of 100 FinTech platform partners over the past decade, PYMNTS reported in June.

In a statement included in a court filing, Lineage Bank said: “Synapse’s final trial balance reflects millions of missing funds in the Synapse ecosystem. Lineage, the partner banks, and the Trustee presently lack a clear understanding of the exact amount or the origin of this cash shortfall.”