Guidelines for Appeals of Material Supervisory Determinations
| Published date | 01 September 2020 |
| Citation | 85 FR 54377 |
| Record Number | 2020-19276 |
| Section | Notices |
| Court | Federal Deposit Insurance Corporation |
Federal Register, Volume 85 Issue 170 (Tuesday, September 1, 2020)
[Federal Register Volume 85, Number 170 (Tuesday, September 1, 2020)]
[Notices]
[Pages 54377-54383]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19276]
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FEDERAL DEPOSIT INSURANCE CORPORATION
RIN 3064-ZA20]
Guidelines for Appeals of Material Supervisory Determinations
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Notice and request for comment.
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SUMMARY: The Federal Deposit Insurance Corporation proposes to amend
its Guidelines for Appeals of Material Supervisory Determinations
(Guidelines) to establish an independent office that would generally
replace the existing Supervision Appeals Review Committee (SARC) and to
modify the procedures and timeframes for considering formal
enforcement-related decisions through the supervisory appeals process.
DATES: Written comments must be received by the FDIC on or before
October 20, 2020, for consideration.
ADDRESSES: Interested parties are invited to submit written comments,
identified by RIN 3064-ZA20, by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Agency website: https://www.fdic.gov/regulations/laws/federal/. Follow the instructions for submitting comments.
Email: [email protected]. Include ``RIN 3064-ZA20'' in the
subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW,
Washington, DC 20429.
Hand Delivery/Courier: Guard station at the rear of the
550 17th Street building (located on F Street) on business days between
7:00 a.m. and 5:00 p.m. (EST).
Public Inspection: All comments received will be posted
without change to https://www.fdic.gov/regulations/laws/federal,
including any personal information provided.
FOR FURTHER INFORMATION CONTACT: Samuel B. Lutz, Counsel, Legal
Division, (202) 898-3773, [email protected]; James Watts, Counsel, Legal
Division, (202) 898-6678, [email protected].
SUPPLEMENTARY INFORMATION:
The Federal Deposit Insurance Corporation (FDIC) is publishing for
comment proposed amendments to its Guidelines for Appeals of Material
Supervisory Determinations (Guidelines). The FDIC is seeking comments
regarding these amendments to the Guidelines in order to provide the
public an opportunity to provide input and feedback, although notice
and comment is not required.
The Guidelines describe the process by which insured depository
institutions (IDIs) may appeal material supervisory determinations made
by the FDIC. The current appeals process provides for two stages of
review. First, an IDI requests review of a material supervisory
determination by the appropriate Division Director from the Division of
Risk Management Supervision (RMS), the Division of Depositor and
Consumer Protection (DCP), or the Division of Complex Institution
Supervision and Resolution (CISR). If the IDI is not satisfied with the
Division Director's decision, it may proceed to the second stage of the
process--an appeal of that decision to the FDIC's Supervision Appeals
Review Committee (SARC), a standing committee of the FDIC's Board of
Directors (Board).
The proposed amendments would replace the SARC with a newly
established independent office that would exclusively consider
supervisory appeals. In addition, the proposal would modify the
procedures and timeframes related to considering formal enforcement-
related decisions through the supervisory appeals process.
Background
Section 309(a) of the Riegle Community Development and Regulatory
Improvement Act of 1994 (Riegle Act) required the FDIC (as well as the
other Federal banking agencies and the National Credit Union
Administration) to establish an ``independent intra-agency appellate
process'' to review material supervisory determinations.\1\ The Riegle
Act defines the term ``independent appellate process'' to mean ``a
review by an agency official who does not directly or indirectly report
to the agency official who made the material supervisory determination
under review.'' \2\ In the appeals process, the FDIC is required to
ensure that: (1) An IDI's appeal of a material supervisory
determination is heard and decided expeditiously; and (2) appropriate
safeguards exist for protecting appellants from retaliation by agency
examiners.\3\
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\1\ 12 U.S.C. 4806(a).
\2\ 12 U.S.C. 4806(f)(2).
\3\ 12 U.S.C. 4806(b).
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The Riegle Act defines material supervisory determinations to
include determinations relating to: (1) Examination ratings; (2) the
adequacy of loan loss reserve provisions; and (3) classifications on
loans that are significant to an institution.\4\ Specifically excluded
from this definition are decisions to appoint a conservator or receiver
for an IDI or to take prompt corrective action pursuant to Section 38
of the Federal Deposit Insurance Act (FDI Act), 12 U.S.C. 1831o.\5\
Finally, Section 309(g) of the Riegle Act expressly provides that the
requirement to establish an appeals process shall not affect the
authority of the Federal banking agencies to take enforcement or
supervisory actions against an IDI.\6\
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\4\ 12 U.S.C. 4806(f)(1)(A).
\5\ 12 U.S.C. 4806(f)(1)(B).
\6\ 12 U.S.C. 4806(g).
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A. Structure of the Supervisory Appeals Review Committee
On March 21, 1995, the Board adopted the Guidelines to implement
Section 309(a). The Board, at that time, established the SARC to
consider and decide appeals of material supervisory determinations.\7\
The SARC was initially comprised of five members: The FDIC's Vice
Chairperson (as Chairperson of the SARC), the Director of the Division
of Supervision (DOS) (the predecessor to RMS), the Director of the
Division of Compliance and Consumer Affairs (DCA) (the predecessor to
DCP), the FDIC Ombudsman, and the General Counsel.\8\
[[Page 54378]]
Consistent with the Riegle Act's mandate to create an intra-agency
appeals process, membership in the SARC was limited to FDIC
officials.\9\ In order to ``establish[] a fair and credible review
process,'' the SARC was comprised of senior officials at the FDIC,
including the Directors of DOS and DCA, who were expected to ``bring to
the Committee the necessary experience and judgment to make well-
informed decisions concerning determinations under review.'' \10\ The
Guidelines were subsequently amended to add the Director of the
Division of Insurance as a voting member of the SARC, and to provide
formally that the Directors of DOS and DCA would not vote on cases
brought before the SARC involving their respective divisions.\11\
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\7\ 60 FR 15923 (Mar. 28, 1995).
\8\ 60 FR 15923, 15930. Committee members could also designate
another person to serve on their behalf.
\9\ 60 FR 15923, 15924.
\10\ 60 FR 15923, 15924.
\11\ 69 FR 41479, 41480 (July 9, 2004).
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In July 2004, the FDIC revised the Guidelines to change the
structure and composition of the SARC to its current form.
Specifically, the voting members of the SARC are now comprised of: One
of the FDIC's three inside directors (who serves as the SARC
Chairperson), and one deputy or special assistant to each of the other
two inside directors.\12\ The FDIC's General Counsel also serves as a
non-voting member of the SARC. In the event of a vacancy, the
Guidelines authorize the FDIC Chairperson to designate alternate
member(s) to the SARC, so long as the alternate member was not directly
or indirectly involved in making or affirming the material supervisory
determination under review. These changes were intended to avoid the
potential conflicts then faced by the Ombudsman and Division
Directors,\13\ and to ``further underscore the perception of the SARC
as a fair and independent high-level body for review of material
supervisory determinations within the FDIC.'' \14\
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\12\ 69 FR 41479, 41480.
\13\ 69 FR 41479, 41480-81. For example, the Ombudsman was
excluded from the SARC in order to avoid any possible conflict
between the Ombudsman's statutory role as a liaison between the
agency and financial institutions on the one hand, and as a decision
maker on the SARC on the other hand.
\14\ 69 FR 41479, 41480.
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B. 2019 Listening Sessions on Supervisory Appeals and Dispute
Resolution Process
In 2019, the FDIC decided to explore potential improvements to the
supervisory appeals process. As part of this process, the FDIC's Office
of the Ombudsman hosted a Webinar and in-person listening sessions in
each FDIC Region regarding the agency's supervisory appeals and dispute
resolution processes. The sessions offered bankers and other interested
parties an opportunity to provide individual input and recommendations
regarding the supervisory appeals process.\15\ Participants were
encouraged to comment on various topics, including perceived barriers
to, or concerns about, resolving disagreements, timeframes and
procedures for pursuing reviews and appeals, and information publicly
available on appeals and examination disagreements.
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\15\ See FIL-52-2019 (Sep. 24, 2019), https://www.fdic.gov/news/financial-institution-letters/2019/fil19052.pdf.
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Among other topics, session participants offered suggestions on the
composition of the SARC. In particular, participants focused on the
composition of the Committee and opportunities to further enhance the
independence of the appeals process. Relatedly, participants emphasized
the importance of ensuring that SARC members have the subject matter
expertise needed to decide supervisory appeals. Participants offered a
range of suggestions on this topic, including adding an individual who
is not otherwise affiliated with the FDIC to the Committee, such as a
retired banking attorney or a former Federal or State bank regulator.
Certain challenges were also discussed with respect to adding an
individual who is not affiliated with the FDIC, such as ensuring the
confidentiality of information and the avoidance of conflicts of
interest.
Questions related to the timeframes for appeals and the types of
matters that may be appealed if the FDIC pursues a formal enforcement
action were also raised at a number of the listening sessions. Through
these discussions, it appears that the procedures that apply when the
FDIC has provided notice of a written or proposed enforcement action
may be a source of confusion to bankers.
Participants also raised concerns about bankers' fear of
retaliation by FDIC examiners, notwithstanding existing provisions in
the Guidelines prohibiting such retaliation. This concern was cited as
a basis for causing bankers to be reluctant to fully engage with the
FDIC on material areas of disagreement. FDIC policy currently prohibits
any retaliation, abuse, or retribution by an agency examiner or any
FDIC personnel against an institution, and the FDIC continues to
explore options to reaffirm its commitment to and ensure compliance
with this policy. In addition, while not specifically related to the
supervisory appeals process, participants provided a variety of
comments and recommendations on the examination process. Participants
also shared views regarding the publicly available information on SARC
decisions and ideas for improving the transparency of SARC decisions,
such as publishing aggregate data on the outcomes of supervisory
appeals.
Amendments to the Guidelines
The FDIC's experience with the SARC, along with feedback obtained
through the listening sessions, suggests that there may be
opportunities to improve the FDIC's supervisory appeals process,
particularly with respect to enhancing the independence of the SARC and
the procedures and timeframes that apply to determinations in the
context of formal enforcement-related decisions. Accordingly, through
this Notice, the FDIC is seeking comment on amendments to the
supervisory appeals process that would establish an independent office
within the FDIC that would have as its only function the review and
consideration of supervisory appeals. The FDIC is also proposing
amendments to improve its procedures and timeline for the consideration
of certain decisions related to formal enforcement actions through the
supervisory appeals process.
Proposed Office of Supervisory Appeals
The FDIC proposes to replace the SARC with an independent,
standalone office within the FDIC, which would be known as the Office
of Supervisory Appeals (Office). The Office would report directly to
the FDIC Chairperson's Office and would have delegated authority to
independently consider and resolve intra-agency supervisory appeals.
The Office would be fully independent of those FDIC Divisions with
authority to issue material supervisory determinations (RMS, DCP, and
CISR), while still operating within the FDIC.
1. Staffing of the Office
The FDIC proposes that the members of the Office responsible for
deciding appeals have bank supervisory or examination experience (for
example, such individuals may be retired bank examiners). Such
reviewing officials would be employees of the FDIC and may serve on
staggered terms. To promote the independence of the Office, the FDIC
anticipates recruiting externally and employing reviewing officials on
a part-time or intermittent, time-limited basis. It is possible that
particular individuals would be selected from a pool of reviewing
officials for an
[[Page 54379]]
appeal on a case-by-case basis. Members of the Office, as employees of
the FDIC, would be cleared for potential conflicts of interest and
would be subject to the FDIC's normal requirements for confidentiality.
In creating this Office, the FDIC is not intending to create
unnecessary layers of decision-making. The Office, as envisioned, would
be devoted to executing the FDIC's supervisory appeals functions, which
responsibilities would include considering and reviewing appeals and
issuing decisions.
2. Appeals Process
IDIs would continue to be encouraged to make good-faith efforts to
resolve disagreements with examiners and/or the appropriate Regional
Office. If these efforts are not successful, IDIs would submit a
request for review with the appropriate Division Director. Upon
receiving a request for review, the Division Director would have the
option of issuing a written decision or sending the appeal directly to
the Office. For example, if an IDI appealed a second material
supervisory determination based on similar facts and circumstances
while its initial appeal is pending before the Office, the FDIC expects
that the Division Director would refer the subsequent appeal to the
Office. IDIs that disagree with a decision made by the Division
Director could submit an appeal to the Office.
A three-member panel of the Office would consider appeals and would
issue a written decision. The IDI and the Division Director would
continue to be permitted to submit views on the appeal to the Office
during this stage of Office's review process, and the Ombudsman also
would be authorized to submit views to the review panel. The Legal
Division would provide counsel to the Office.
Oral presentation would be permitted if a request is made by the
institution or by FDIC staff. Under the existing Guidelines, the SARC
has discretion whether or not to allow oral presentation, but requests
for oral presentations are generally granted.
The reviewing panel would be an appellate body that would make
independent supervisory determinations. The panel would review appeals
for consistency with the policies, practices, and mission of the FDIC
and the overall reasonableness of, and the support offered for, the
positions advanced, consistent with the existing standard of review for
the SARC. The scope of the panel's review would be limited to the facts
and circumstances as they existed prior to, or at the time the material
supervisory determination was made, even if later discovered, and no
consideration would be given to any facts or circumstances that occur
or corrective action taken after the determination was made. The
Office's role would not be to set policy, which is the province of the
Board and its designees. For that reason, the Office would not consider
aspects of an appeal that seek to change or modify FDIC policy or
rules. As part of its role in providing counsel to the Office, the
Legal Division would also advise on existing FDIC policies and rules,
and help ensure no decisions made by the Office changed or modified
FDIC policies or rules. Additionally, if an institution has multiple
appeals pending based upon similar facts and circumstances, those
appeals could be consolidated for expediency.
Consistent with the existing Guidelines and the Riegle Act,
decisions to appoint a conservator or receiver for an insured
depository institution would not be considered material supervisory
determinations. Under this proposal, the Guidelines would further
clarify that decisions made in furtherance of the resolution or
receivership process or planning (such as decisions made pursuant to
parts 370, 371, and 381, and Sec. 360.10 of the FDIC's rules and
regulations) also would not be considered material supervisory
determinations. Unlike the ``material supervisory determinations''
enumerated in the statute and the current Guidelines,\16\ decisions
made under the regulatory provisions identified above are not focused
on monitoring for and addressing issues that may affect an
institution's condition. Instead, these decisions involve actions
related to assessing or promoting the resolvability of certain
institutions, such as those facilitating the prompt payment of deposit
insurance to a large number of depositors or the orderly resolution of
an institution with a portfolio of qualified financial contracts.
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\16\ The Riegle Act defined ``material supervisory
determinations'' to include determinations relating to examination
ratings, the adequacy of loan loss reserve provisions, and loan
classifications on loans that are significant to an institution. 12
U.S.C. 4806(f)(1)(A). Section D of the current Guidelines defines
``material supervisory determinations'' more broadly to include
seventeen different types of supervisory determinations.
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The FDIC anticipates that these combined changes could provide
several advantages over the existing supervisory appeals process and
would address several of the recommendations presented during the
Webinar and in-person listening sessions. In particular, the FDIC
anticipates that:
By creating a standalone office within the FDIC with
authority to consider and resolve supervisory appeals, and by staffing
that office with professionals serving term or other non-permanent
appointments, the supervisory appeals process could operate more
independently, and without perceived conflicts of interest, in the
FDIC's organizational structure;
Establishing the Office within the FDIC would continue to
protect supervisory and confidential information, and avoid actual and
perceived conflicts of interest, while still satisfying the FDIC's
statutory requirement to have an intra-agency appeals process;
Staffing the Office with professionals who have bank
supervisory or examination experience would ensure that individuals
deciding on appeals have relevant knowledge and expertise, and would
facilitate a robust and responsive supervisory appeals process that
will be consistent over time; and
The proposed structure would be scalable in terms of
staffing, so the Office may be in a position to adapt more quickly to
cyclical workload variations, allowing the FDIC to handle varying
numbers of appeals in shorter periods of time.
The FDIC anticipates that staffing and otherwise establishing the
Office would require a period of time following the adoption of any
revised Guidelines. During this time, supervisory appeals would
continue to be heard by the SARC pursuant to the existing Guidelines.
Procedures and Timeframes for Formal Enforcement-Related Decisions
The FDIC also proposes to amend its procedures for considering
formal enforcement-related decisions through the supervisory appeals
process. Generally, the FDIC identifies the facts and circumstances
that may give rise to a formal enforcement action during the
examination process, and these facts and circumstances are described in
a Report of Examination (ROE) that is transmitted to the IDI at the
conclusion of the examination.
In July 2017, the FDIC revised its Guidelines to provide an
opportunity for IDIs to appeal certain material supervisory
determinations underlying formal enforcement actions through the
supervisory appeals process.\17\ Specifically, the revised Guidelines
provide that if the FDIC does not commence a formal enforcement action
within 120 days after giving written
[[Page 54380]]
notice to an IDI of a recommended or proposed formal enforcement
action, the IDI may appeal the facts and circumstances underlying the
formal enforcement action to the SARC, unless the SARC Chairperson
agrees to extend the 120-day period.\18\
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\17\ 82 FR 34522, 34524 (July 25, 2017).
\18\ 82 FR 34522, 34526.
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While the 2017 amendments to the Guidelines may have been helpful
in addressing some of the issues the FDIC encountered in administering
the supervisory appeals process, further changes to the process may be
beneficial. Consistent with feedback obtained through the 2019
listening sessions, the FDIC has observed some confusion as to when
determinations underlying formal enforcement-related actions become
appealable. In addition, a timeframe longer than 120 days may be
necessary in order to fully review the facts and circumstances that
lead to enforcement actions and ensure that such actions are not
brought prematurely, and to allow sufficient time for an IDI to
consider and execute a consent order.
The proposal clarifies that, for purposes of the supervisory
appeals process, a formal enforcement-related action commences--and
appeal rights become temporarily unavailable--when the FDIC initiates a
formal investigation, issues a notice of charges (or notice of
assessment, as applicable), provides the IDI with a draft consent
order, or otherwise provides written notice to the IDI that the FDIC is
reviewing the relevant facts and circumstances to determine whether a
formal enforcement action is merited. This written notification may be
provided in the transmittal letter that accompanies the ROE.
The proposal would further require that if the FDIC provides
written notice that the FDIC is determining whether a formal
enforcement action is merited, the FDIC must provide the IDI with a
draft consent order within 120 days of the date on which notice was
given. Such a draft consent order could include a standalone cease and
desist order, an order to pay civil money penalties, or an order for
restitution. If the FDIC failed to provide the IDI with a draft consent
order within this 120-day period, the IDI's supervisory appeal rights
would be made available.
Once the FDIC provides an IDI with a draft consent order, the
parties would have an opportunity to negotiate the details of a
potential settlement. The proposal would not impose a fixed time limit
on such negotiations. At any time, if the IDI believes that further
negotiations would not be productive and notifies the Division of this
decision in writing, the Division would have 90 days from receiving the
institution's rejection of the consent order to issue a notice of
charges (or assessment) or to open an order of investigation, or the
IDI's supervisory appeal rights would be made available. In either
case, once the IDI's supervisory appeal rights are made available, the
IDI would have 60 days to file an appeal, consistent with the standard
timeline following a material supervisory determination. If the IDI
agrees to the consent order, then the matter would be resolved and the
need for an appeal would be obviated.
Request for Comment
Question 1: In contrast to the SARC, the Office would not provide
representation for Board members in the review process. Should the FDIC
Chairperson and/or other Board members have an opportunity to review
decisions before issuance?
Question 2: The FDIC proposes that the members of the Office have
bank supervisory or examination experience. Does this constitute the
appropriate qualifications and experience?
Question 3: Are there additional steps the FDIC should take to
promote independence of the Office?
Question 4: How many reviewing officials should be included on a
panel? Is three an appropriate number? Are there situations where more
or less panelists might be appropriate?
Question 5: Should the appellate process have any additional
level(s) of review before or after the proposed three-member panel?
Question 6: Do the proposed timelines properly balance the goals of
resolving appeals as expeditiously as possible and providing adequate
time for preparation and review?
Question 7: Participants at the listening sessions commented on the
type and extent of publicly available information on SARC decisions.
What type of information would be helpful to publish about the appeals
process or specific appeal decisions to promote transparency while
still maintaining confidentiality?
Question 8: The FDIC expects the proposed changes to the procedures
and timeframes applicable to formal enforcement-related decisions to be
effective for the majority of enforcement actions. How should the FDIC
handle those unusual cases for which the proposed timeframes are too
restrictive? Should the parties expect to invoke the provision(s)
allowing for an extension of the timeframes in these cases?
Proposed Amended Guidelines for Appeals of Material Supervisory
Determinations
A. Introduction
Section 309(a) of the Riegle Community Development and Regulatory
Improvement Act of 1994 (Pub. L. 103-325, 108 Stat. 2160) (Riegle Act)
required the Federal Deposit Insurance Corporation (FDIC) to establish
an independent intra-agency appellate process to review material
supervisory determinations made at insured depository institutions that
it supervises. The Guidelines for Appeals of Material Supervisory
Determinations (Guidelines) describe the types of determinations that
are eligible for review and the process by which appeals will be
considered and decided. The procedures set forth in these Guidelines
establish an appeals process for the review of material supervisory
determinations by the Office of Supervisory Appeals (Office).
B. Reviewing Officials
The Office will be staffed with reviewing officials who have bank
supervisory or examination experience. Reviewing officials will
consider and decide appeals submitted to the Office. Each appeal will
be reviewed and decided by a panel of three reviewing officials who
have no conflicts of interest with respect to the appeal or the parties
to the appeal.
C. Institutions Eligible To Appeal
The Guidelines apply to the insured depository institutions that
the FDIC supervises (i.e., insured State nonmember banks, insured
branches of foreign banks, and state savings associations), and to
other insured depository institutions with respect to which the FDIC
makes material supervisory determinations.
D. Determinations Subject To Appeal
An institution may appeal any material supervisory determination
pursuant to the procedures set forth in these Guidelines.
(1) Material supervisory determinations include:
(a) CAMELS ratings under the Uniform Financial Institutions Rating
System;
(b) IT ratings under the Uniform Interagency Rating System for Data
Processing Operations;
(c) Trust ratings under the Uniform Interagency Trust Rating
System;
(d) CRA ratings under the Revised Uniform Interagency Community
Reinvestment Act Assessment Rating System;
[[Page 54381]]
(e) Consumer compliance ratings under the Uniform Interagency
Consumer Compliance Rating System;
(f) Registered transfer agent examination ratings;
(g) Government securities dealer examination ratings;
(h) Municipal securities dealer examination ratings;
(i) Determinations relating to the adequacy of loan loss reserve
provisions;
(j) Classifications of loans and other assets in dispute the amount
of which, individually or in the aggregate, exceeds 10 percent of an
institution's total capital;
(k) Determinations relating to violations of a statute or
regulation that may affect the capital, earnings, or operating
flexibility of an institution, or otherwise affect the nature and level
of supervisory oversight accorded an institution;
(l) Truth in Lending Act (Regulation Z) restitution;
(m) Filings made pursuant to 12 CFR 303.11(f), for which a request
for reconsideration has been granted, other than denials of a change in
bank control, change in senior executive officer or board of directors,
or denial of an application pursuant to section 19 of the Federal
Deposit Insurance Act (FDI Act), 12 U.S.C. 1829 (which are contained in
12 CFR 308, subparts D, L, and M, respectively), if the filing was
originally denied by the Director, Deputy Director, or Associate
Director of the Division of Depositor and Consumer Protection (DCP) or
the Division of Risk Management Supervision (RMS);
(n) Decisions to initiate informal enforcement actions (such as
memoranda of understanding);
(o) Determinations regarding the institution's level of compliance
with a formal enforcement action; however, if the FDIC determines that
the lack of compliance with an existing formal enforcement action
requires an additional formal enforcement action, the proposed new
enforcement action is not appealable;
(p) Matters requiring board attention; and
(q) Any other supervisory determination (unless otherwise not
eligible for appeal) that may affect the capital, earnings, operating
flexibility, or capital category for prompt corrective action purposes
of an institution, or that otherwise affects the nature and level of
supervisory oversight accorded an institution.
(2) Material supervisory determinations do not include:
(a) Decisions to appoint a conservator or receiver for an insured
depository institution, and other decisions made in furtherance of the
resolution or receivership process, including but not limited to
determinations pursuant to parts 370, 371, and 381, and Sec. 360.10 of
the FDIC's rules and regulations;
(b) Decisions to take prompt corrective action pursuant to section
38 of the FDI Act, 12 U.S.C. 1831o;
(c) Determinations for which other appeals procedures exist (such
as determinations of deposit insurance assessment risk classifications
and payment calculations); and
(d) Formal enforcement-related actions and decisions, including
determinations and the underlying facts and circumstances that form the
basis of a recommended or pending formal enforcement action.
(3) A formal enforcement-related action or decision commences, and
becomes unappealable, when the FDIC initiates a formal investigation
under 12 U.S.C. 1820(c) (Order of Investigation), issues a notice of
charges or a notice of assessment under 12 U.S.C. 1818 or other
applicable laws (Notice of Charges), provides the institution with a
draft consent order, or otherwise provides written notice to the
institution that the FDIC is reviewing the facts and circumstances
presented to determine if a formal enforcement action is merited under
applicable statutes or published enforcement-related policies of the
FDIC, including written notice of a referral to the Attorney General
pursuant to the Equal Credit Opportunity Act (ECOA) or a notice to the
Secretary of Housing and Urban Development (HUD) for violations of ECOA
or the Fair Housing Act (FHA). Such notice may be provided in the
transmittal letter accompanying a Report of Examination. For the
purposes of these Guidelines, remarks in a Report of Examination do not
constitute written notice that the FDIC is reviewing the facts and
circumstances presented to determine if a proposed enforcement action
is merited. Commencement of a formal enforcement-related action or
decision will not suspend or otherwise affect a pending request for
review or appeal that was submitted before the commencement of the
formal enforcement-related action or decision.
(4) Additional Appeal Rights:
(a) In the case of any written notice from the FDIC to the
institution that the FDIC is determining whether a formal enforcement
action is merited, the FDIC must issue an Order of Investigation, issue
a Notice of Charges, or provide the institution with a draft consent
order within 120 days of such a notice, or appeal rights will be made
available pursuant to these Guidelines. If the FDIC timely provides the
institution with a draft consent order and the institution rejects the
draft consent order in writing, the FDIC must issue an Order of
Investigation or a Notice of Charges within 90 days from the date on
which the institution rejects the draft consent order in writing or
appeal rights will be made available pursuant to these Guidelines. The
FDIC may extend these periods, with the approval of the Chairperson's
Office, after the FDIC notifies the institution that the relevant
Division Director is seeking formal authority to take an enforcement
action.
(b) In the case of a referral to the Attorney General for
violations of the ECOA, beginning on the date the referral is returned
to the FDIC, the FDIC must proceed in accordance within paragraph (a),
including within the specified timeframes, or appeal rights will be
made available pursuant to these Guidelines.
(c) In the case of providing notice to HUD for violations of the
ECOA or the FHA, beginning on the date the notice is provided, the FDIC
must proceed in accordance within paragraph (a), including within the
specified timeframes, or appeal rights will be made available pursuant
to these Guidelines.
(d) Written notification will be provided to the institution within
10 days of a determination that appeal rights have been made available
under this section.
(e) The relevant FDIC Division and the institution may mutually
agree to extend the timeframes in paragraphs (a), (b), and (c) if the
parties deem it appropriate.
E. Good-Faith Resolution
An institution should make a good-faith effort to resolve any
dispute concerning a material supervisory determination with the on-
site examiner and/or the appropriate Regional Office. The on-site
examiner and the Regional Office will promptly respond to any concerns
raised by an institution regarding a material supervisory
determination. Informal resolution of disputes with the on-site
examiner and the appropriate Regional Office is encouraged, but seeking
such a resolution is not a condition to filing a request for review
with the appropriate Division, either DCP, RMS, or the Division of
Complex Institution Supervision and Resolution (CISR), or to filing a
subsequent appeal with the Office under these Guidelines.
[[Page 54382]]
F. Filing a Request for Review With the Appropriate Division
(1) An institution may file a request for review of a material
supervisory determination with the Division that made the
determination, either the Director, DCP, the Director, RMS, or the
Director, CISR (Director or Division Director), 550 17th Street NW,
Room F-4076, Washington, DC 20429, within 60 calendar days following
the institution's receipt of a report of examination containing a
material supervisory determination or other written communication of a
material supervisory determination. A request for review must be in
writing and must include:
(a) A detailed description of the issues in dispute, the
surrounding circumstances, the institution's position regarding the
dispute and any arguments to support that position (including citation
of any relevant statute, regulation, policy statement, or other
authority), how resolution of the dispute would materially affect the
institution, and whether a good-faith effort was made to resolve the
dispute with the on-site examiner and the Regional Office; and
(b) A statement that the institution's board of directors has
considered the merits of the request and has authorized that it be
filed.
(2) Within 45 calendar days of receiving a request for review
described in paragraph (1), the Division Director will:
(a) Review the appeal for consistency with the policies, practices,
and mission of the FDIC and the overall reasonableness of, and the
support offered for, the positions advanced, and issue a written
determination on the request for review, setting forth the grounds for
that determination; or
(b) refer the request for review to the Office for consideration as
an appeal under Section G and provide written notice to the institution
that the request for review has been referred to the Office.
(3) No appeal to the Office will be allowed unless an institution
has first filed a timely request for review with the appropriate
Division Director.
(4) In any decision issued pursuant to paragraph (2)(a) of this
section, the Director will inform the institution of the 30-day time
period for filing with the Office and will provide the mailing address
for any appeal the institution may wish to file.
(5) The Division Director may request guidance from the Office or
the Legal Division as to procedural or other questions relating to any
request for review.
G. Appeal to the Office
An institution that does not agree with the written determination
rendered by the Division Director may appeal that determination to the
Office within 30 calendar days from the date of that determination.
Failure to file within the 30-day time limit may result in denial of
the appeal by the Office.
1. Filing With the Office
An appeal to the Office will be considered filed if the written
appeal is received by the FDIC within 30 calendar days from the date of
the Division Director's written determination or if the written appeal
is placed in the U.S. mail within that 30-day period. If the 30th day
after the date of the Division Director's written determination is a
Saturday, Sunday, or a Federal holiday, filing may be made on the next
business day. The appeal should be sent to the address indicated on the
Division Director's determination being appealed. Upon receiving the
appeal, the Office will send an acknowledgment to the institution, and
will send copies of the institution's appeal to the Office of the
Ombudsman and the appropriate Division Director.
2. Contents of Appeal
The appeal should be labeled to indicate that it is an appeal to
the Office and should contain the name, address, and telephone number
of the institution and any representative, as well as a copy of the
Division Director's determination being appealed. If oral presentation
is sought, that request should be included in the appeal. Only matters
submitted to the appropriate Division Director in a request for review
may be appealed to the Office. Evidence not presented for review to the
Division Director is generally not permitted; such evidence may be
submitted to the Office only if approved by the reviewing panel and
with a reasonable time for the Division Director to review and respond.
The institution should set forth all of the reasons, legal and factual,
why it disagrees with the Division Director's determination. Nothing in
the Office administrative process shall create any discovery or other
such rights.
3. Burden of Proof
The burden of proof as to all matters at issue in the appeal,
including timeliness of the appeal if timeliness is at issue, rests
with the institution.
4. Submissions From the Ombudsman and the Division Director
The Ombudsman and the Division Director each may submit views
regarding the appeal to the Office within 30 calendar days of the date
on which the appeal is received by the Office.
5. Oral Presentation
The Office will, if a request is made by the institution or by FDIC
staff, allow an oral presentation. The Office may hear oral
presentations in person, telephonically, or through other means agreed
upon by the parties. If an oral presentation is held, the institution
and FDIC staff will be allowed to present their positions on the issues
raised in the appeal and to respond to any questions from the Office.
6. Consolidation, Dismissal, and Rejection
Appeals based upon similar facts and circumstances may be
consolidated for expediency. An appeal may be dismissed by the Office
if it is not timely filed, if the basis for the appeal is not
discernable from the appeal, or if the institution moves to withdraw
the appeal. The Office will decline to consider an appeal if the
institution's right to appeal is not yet available under Section D(4),
above.
7. Scope of Review and Decision
The Office will be an appellate body and will make independent
supervisory determinations. The Office will review the appeal for
consistency with the policies, practices, and mission of the FDIC and
the overall reasonableness of, and the support offered for, the
positions advanced. The Office's review will be limited to the facts
and circumstances as they existed prior to, or at the time the material
supervisory determination was made, even if later discovered, and no
consideration will be given to any facts or circumstances that occur or
corrective action taken after the determination was made. The Office
will not consider any aspect of an appeal that seeks to change or
modify existing FDIC rules or policy. The Office, with consultation
from the Legal Division, will refer any appeals that raise policy
matters of first impression to the Board for its consideration. The
Office will notify the institution, in writing, of its decision
concerning the disputed material supervisory determination(s) within 45
days from the date the Office meets to consider the appeal, which
meeting will be held within 90 days from the date of the filing of the
appeal or from the date that the Division Director refers the appeal to
the Office.
H. Publication of Decisions
Decisions of the Office will be published as soon as practicable,
and the published decisions will be redacted
[[Page 54383]]
to avoid disclosure of the name of the appealing institution and exempt
information. In cases in which redaction is deemed insufficient to
prevent improper disclosure, published decisions may be presented in
summary form. Published Office decisions may be cited as precedent in
appeals to the Office. Annual reports on Division Directors' decisions
with respect to institutions' requests for review of material
supervisory determinations also will be published.
I. Appeal Guidelines Generally
Appeals to the Office will be governed by these Guidelines. The
Office, with the concurrence of the Legal Division, will retain
discretion to waive any provision of the Guidelines for good cause.
Supplemental rules governing the Office's operations may be adopted.
J. Limitation on Agency Ombudsman
The subject matter of a material supervisory determination for
which either an appeal to the Office has been filed, or a final Office
decision issued, is not eligible for consideration by the Ombudsman.
However, pursuant to Section (G)(4) of these Guidelines, the Ombudsman
may submit views to the Office for its consideration in connection with
any pending appeal.
K. Coordination With State Regulatory Authorities
In the event that a material supervisory determination subject to a
request for review is the joint product of the FDIC and a State
regulatory authority, the Director, DCP, the Director, RMS, or the
Director, CISR, as appropriate, will promptly notify the appropriate
State regulatory authority of the request, provide the regulatory
authority with a copy of the institution's request for review and any
other related materials, and solicit the regulatory authority's views
regarding the merits of the request before making a determination. In
the event that an appeal is subsequently filed with the Office, the
Office will notify the institution and the State regulatory authority
of its decision. Once the Office has issued its determination, any
other issues that may remain between the institution and the State
authority will be left to those parties to resolve.
L. Effect on Supervisory or Enforcement Actions
The use of the procedures set forth in these Guidelines by any
institution will not affect, delay, or impede any formal or informal
supervisory or enforcement action in progress during the appeal or
affect the FDIC's authority to take any supervisory or enforcement
action against that institution.
M. Effect on Applications or Requests for Approval
Any application or request for approval made to the FDIC by an
institution that has appealed a material supervisory determination that
relates to, or could affect the approval of, the application or request
will not be considered until a final decision concerning the appeal is
made unless otherwise requested by the institution.
N. Prohibition on Examiner Retaliation
The FDIC has an experienced examination workforce and is proud of
its professionalism and dedication. FDIC policy prohibits any
retaliation, abuse, or retribution by an agency examiner or any FDIC
personnel against an institution. Such behavior against an institution
that appeals a material supervisory determination constitutes
unprofessional conduct and will subject the examiner or other personnel
to appropriate disciplinary or remedial action. Institutions that
believe they have been retaliated against are encouraged to contact the
Regional Director for the appropriate FDIC region. Any institution that
believes or has any evidence that it has been subject to retaliation
may file a complaint with the Director, Office of the Ombudsman,
Federal Deposit Insurance Corporation, 3501 Fairfax Drive, Suite E-
2022, Arlington, VA 22226, explaining the circumstances and the basis
for such belief or evidence and requesting that the complaint be
investigated and appropriate disciplinary or remedial action taken. The
Office of the Ombudsman will work with the appropriate Division
Director to resolve the allegation of retaliation.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on August 21, 2020.
James P. Sheesley,
Acting Assistant Executive Secretary.
[FR Doc. 2020-19276 Filed 8-31-20; 8:45 am]
BILLING CODE 6714-01-P
