Role of Supervisory Guidance
| Published date | 03 February 2021 |
| Citation | 86 FR 7949 |
| Record Number | 2021-01867 |
| Section | Rules and Regulations |
| Court | National Credit Union Administration |
Federal Register, Volume 86 Issue 21 (Wednesday, February 3, 2021)
[Federal Register Volume 86, Number 21 (Wednesday, February 3, 2021)]
[Rules and Regulations]
[Pages 7949-7958]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01867]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 791
[Docket No. NCUA-2020-0098]
RIN 3133-AF28
Role of Supervisory Guidance
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule.
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SUMMARY: The NCUA Board is adopting a final rule that codifies the
Interagency Statement Clarifying the Role of
[[Page 7950]]
Supervisory Guidance, issued by the NCUA, Federal Deposit Insurance
Corporation (FDIC), the Board of Governors of the Federal Reserve (the
Board), the Office of Comptroller of the Currency (OCC), and the
Consumer Financial Protection Bureau (Bureau) (collectively, the
agencies) on September 11, 2018 (2018 Statement). By codifying the 2018
Statement, with amendments, the final rule confirms that the NCUA will
continue to follow and respect the limits of administrative law in
carrying out their supervisory responsibilities. The 2018 Statement
reiterated well-established law by stating that, unlike a law or
regulation, supervisory guidance does not have the force and effect of
law. As such, supervisory guidance does not create binding legal
obligations for the public. Because it is incorporated into the final
rule, the 2018 Statement, as amended, is binding on the NCUA. The final
rule adopts the rule as proposed without change.
DATES: The provisions of this final rule are effective on March 5,
2021.
FOR FURTHER INFORMATION CONTACT: Naghi Khaled, Policy Officer (703)
664-3883 or Scott Neat, Associate Director, Office of Examinations and
Insurance at (703) 518-6363; Ian Marenna, Associate General Counsel, or
Marvin Shaw, Staff Attorney, Office of General Counsel, at the above
address or telephone (703) 518-6540. National Credit Union
Administration, 1775 Duke Street, Alexandria, VA 22314.
SUPPLEMENTARY INFORMATION:
I. Background
The NCUA recognizes the important distinction between issuances
that serve to implement acts of Congress (known as ``regulations'' or
``legislative rules'') and non-binding supervisory guidance
documents.\1\ Regulations create binding legal obligations. Supervisory
guidance is issued by an agency to ``advise the public prospectively of
the manner in which the agency proposes to exercise a discretionary
power'' and does not create binding legal obligations.\2\
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\1\ Regulations are commonly referred to as legislative rules
because regulations have the ``force and effect of law.'' Perez v.
Mortgage Bankers Association, 575 U.S. 92, 96 (2015) (citations
omitted).
\2\ See Chrysler v. Brown, 441 U.S. 281, 302 (1979) (quoting the
Attorney General's Manual on the Administrative Procedure Act at 30
n.3 (1947) (Attorney General's Manual) and discussing the
distinctions between regulations and general statements of policy,
of which supervisory guidance is one form).
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In recognition of the important distinction between rules and
guidance, on September 11, 2018, the NCUA along with the Federal
Deposit Insurance Corporation (FDIC), the Board of Governors of the
Federal Reserve (the Board), the Office of Comptroller of the Currency
(OCC), and the Consumer Financial Protection Bureau (Bureau)
(collectively, the agencies) issued the Interagency Statement
Clarifying the Role of Supervisory Guidance (2018 Statement) to explain
the role of supervisory guidance and describe the agencies' approach to
supervisory guidance.\3\ As noted in the 2018 Statement, the agencies
issue various types of supervisory guidance to their respective
supervised institutions, including, but not limited to, interagency
statements, advisories, bulletins, policy statements, questions and
answers, and frequently asked questions. Supervisory guidance outlines
the agencies' supervisory expectations or priorities and articulates
the agencies' general views regarding practices for a given subject
area. Supervisory guidance often provides examples of practices that
mitigate risks, or that the agencies generally consider to be
consistent with safety-and-soundness standards or other applicable laws
and regulations, including those designed to protect consumers.\4\ The
agencies noted in the 2018 Statement that supervised institutions at
times request supervisory guidance and that guidance is important to
provide clarity to these institutions, as well as supervisory staff, in
a transparent way that helps to ensure consistency in the supervisory
approach.\5\
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\3\ See https://www.occ.gov/news-issuances/news-releases/2018/nr-ia-2018-97a.pdf.
\4\ While supervisory guidance offers guidance to the public on
the agencies' approach to supervision under statutes and regulations
and safe and sound practices, the issuance of guidance is
discretionary and is not a prerequisite to an agency's exercise of
its statutory and regulatory authorities. This point reflects the
fact that statutes and legislative rules, not statements of policy,
set legal requirements.
\5\ The Administrative Conference of the United States (ACUS)
has recognized the important role of guidance documents and has
stated that guidance can ``make agency decision-making more
predictable and uniform and shield regulated parties from unequal
treatment, unnecessary costs, and unnecessary risk, while promoting
compliance with the law.'' ACUS, Recommendation 2017-5, Agency
Guidance Through Policy Statements at 2 (adopted December 14, 2017),
available at https://www.acus.gov/recommendation/agency-guidance-through-policy-statements. ACUS also suggests that ``policy
statements are generally better [than legislative rules] for dealing
with conditions of uncertainty and often for making agency policy
accessible.'' Id. ACUS's reference to ``policy statements'' refers
to the statutory text of the APA, which provides that notice and
comment is not required for ``general statements of policy.'' The
phrase ``general statements of policy'' has commonly been viewed by
courts, agencies, and administrative law commentators as including a
wide range of agency issuances, including guidance.
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The 2018 Statement restated existing law and reaffirmed the
agencies' understanding that supervisory guidance does not create
binding, enforceable legal obligations. The 2018 Statement reaffirmed
that the agencies do not issue supervisory criticisms for
``violations'' of supervisory guidance and described the appropriate
use of supervisory guidance by the agencies. In the 2018 Statement, the
agencies also expressed their intention to (1) limit the use of
numerical thresholds in guidance; (2) reduce the issuance of multiple
supervisory guidance documents on the same topic; (3) continue efforts
to make the role of supervisory guidance clear in communications to
examiners and supervised institutions; and (4) encourage supervised
institutions to discuss their concerns about supervisory guidance with
their agency contact.
On November 5, 2018, the OCC, Board, FDIC, and Bureau each received
a petition for a rulemaking (Petition), as permitted under the
Administrative Procedure Act (APA),\6\ requesting that the agencies
codify the 2018 Statement.\7\ The Petitioners did not submit a petition
to the NCUA, which has no supervisory authority over the financial
institutions that are represented by Petitioners. The NCUA determined
that it was appropriate to join this rulemaking on its own initiative.
References in the preamble to ``agencies'' therefore include the NCUA.
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\6\ 5 U.S.C. 553(e).
\7\ See Petition for Rulemaking on the Role of Supervisory
Guidance, available at https://bpi.com/wp-content/uploads/2018/11/BPI_PFR_on_Role_of_Supervisory_Guidance_Federal_Reserve.pdf.
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The Petition argued that a rule on guidance is necessary to bind
future agency leadership and staff to the 2018 Statement's terms. The
Petition also suggested there are ambiguities in the 2018 Statement
concerning how supervisory guidance is used in connection with matters
requiring attention, matters requiring immediate attention
(collectively, MRAs for banks), as well as in connection with other
supervisory actions that should be clarified through a rulemaking. As
explained in the next section, the NCUA examiners use a notification
similar to an MRA called a Document of Resolution (DOR). Finally, the
Petition called for the rulemaking to implement changes in the
agencies' standards for issuing MRAs. Specifically, the Petition
requested that the agencies limit the role of MRAs to addressing
circumstances in which there is a violation of a statute,
[[Page 7951]]
regulation, or order, or demonstrably unsafe or unsound practices.
B. NCUA's Examination and Supervisory Oversight
As a member of the Federal Financial Institution Examination
Council (FFIEC),\8\ the NCUA participates with and generally has
regulations and guidance consistent with the other financial
regulators. Nevertheless, given its different statutory framework, the
NCUA's supervision of Federal credit unions and federally insured,
state-chartered credit unions is different than the other agencies.
With respect to safety and soundness, the Federal Credit Union Act
requires the NCUA to ensure all federally insured credit unions operate
safely and soundly.\9\ In particular, 12 U.S.C. 1786(b) compels the
agency to act to correct unsafe or unsound conditions or practices in
insured credit unions.\10\
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\8\ https://www.ffiec.gov/.
\9\ There are 21 references to ``safety and soundness'' in the
Federal Credit Union Act. See 12 U.S.C. 1757(5)(A)(vi)(I), 1759(d &
f), 1781(c)(2), 1782(a)(6)(B), 1786(b), 1786(e), 1786(f), 1786(g),
1786(k)(2), 1786(r), 1786(s), and 1790d(h). Similarly, the NCUA
requires federally insured credit unions to comply with relevant
consumer protection statutes and regulations.
\10\ ``Whenever, in the opinion of the Board, any insured credit
union is engaging or has engaged in unsafe or unsound practices in
conducting the business of such credit union, or is in an unsafe or
unsound condition to continue operations as an insured credit union,
or is violating or has violated an applicable law, rule, regulation,
order, or any condition imposed in writing by the Board in
connection with any action on any application, notice, or other
request by the credit union or institution-affiliated party, or is
violating or has violated any written agreement entered into with
the Board, the Board shall serve upon the credit union a statement
with respect to such practices or conditions or violations for the
purpose of securing the correction thereof.''
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Often, and necessarily, regulatory requirements are not simple
prescriptions that lend themselves to right-or-wrong determinations.
Codifying in regulation all unsafe and unsound conditions and practices
in explicit detail would be unfeasible, especially in light of the
ever-evolving nature of financial services. Highly detailed or
prescriptive regulations would also lead to unintended consequences.
Regulated entities would face additional burden, less flexibility, and
innovation would be stifled.
Notwithstanding these limitations, the NCUA has issued a regulation
that implements the Federal Credit Union Act's requirement that
federally insured credit unions operate safely and soundly. Section
741.3(b) of the NCUA's Rules and Regulation lists various factors the
agency considers ``in determining whether the credit union's financial
condition and policies are both safe and sound.'' Regarding the
continuing insurability of a credit union, Section 741.3(d) of the
NCUA's Rules and Regulation goes on to specify that ``[i]nsurance of
member accounts would not otherwise involve undue risk to the National
Credit Union Share Insurance Fund (NCUSIF).'' \11\
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\11\ This provision states: ``Any circumstances which may be
unique to the particular credit union concerned shall also be
considered in arriving at the determination of whether or not an
undue risk to the NCUSIF is or may be present. For purposes of this
section, the term `undue risk to the NCUSIF' is defined as a
condition which creates a probability of loss in excess of that
normally found in a credit union and which indicates a reasonably
foreseeable probability of the credit union becoming insolvent
because of such condition, with a resultant claim against the
NCUSIF.''
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The NCUA needs to be able to address safety and soundness issues
through supervisory determinations that properly evaluate and weigh the
relevant facts and considerations in their totality. For example, a
federally insured credit union may be engaged in an inherently high-
risk activity, but the credit union may mitigate the risk by holding
extra capital and liquidity and adopting leading practices in managing
the underlying risk. Conversely, another institution may have not
adopted sufficient mitigations to offset the risk, leading to undue
risk to the National Credit Union Share Insurance Fund and taxpayers.
Like the other agencies, the NCUA has instructions that set
requirements for how examiners supervise institutions.\12\ For example,
when addressing a concern in a report of examination, examiners are
required to cite the highest authority related to the subject matter,
and describe the root problem including the corresponding details and
facts that support the examiner's conclusion. Examiners can cite agency
guidance when addressing some violations or unsafe or unsound
conditions or practices when they involve a significant degree of
judgment or interpretation in their application. This is necessary and
helpful for both regulated institutions and examiners by standardizing
application of regulatory requirements that require judgment or
interpretation in their application, instead of relying on the
individual views of each examiner. The examiner guidance explains how
the subject relates to a regulatory or statutory requirement and
provides the institution with additional information on the topic.
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\12\ https://www.ncua.gov/regulation-supervision/manuals-guides/examiners-guide.
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Pursuant to agency policy, examiners may only include in the
Document of Resolution (DOR) \13\ issues that are significant enough
that they would be escalated to the next level of enforcement for
failure to correct the problem. These types of problems are defined as:
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\13\ The Document of Resolution section of the NCUA's report of
examination is the equivalent of Matters Requiring Immediate
Attention used by the other banking agencies.
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Unsafe or unsound practices that reasonably threaten the
stability of the credit union--that is, any action or lack of action
that, if left uncorrected, may result in substantial loss or damage to
the credit union or its members.
Violations of law or regulation that are systemic,
recurring, or that result from willful neglect.
With that statutory and regulatory background in mind, the NCUA
uses DORs to address practices that result in substantive noncompliance
with laws or rules, enforcement actions, or conditions imposed in
writing. The NCUA's policy is to identify deficient practices and
violations in a timely manner and encourage corrective action well
before deficiencies affect a credit union's financial condition or
viability.
II. The Proposed Rule and Comments Received
On November 5, 2020, the agencies issued a proposed rule (Proposed
Rule) that would codify the 2018 Statement, with clarifying changes, as
an appendix to proposed rule text.\14\ The Proposed Rule would
supersede the 2018 Statement. The rule text would also provide that the
amended version of the 2018 Statement is binding on each respective
agency.
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\14\ 85 FR 70512 (November 5, 2020).
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Clarification of the 2018 Statement
The Petition expressed support for the 2018 Statement and
acknowledged that it addresses many issues of concern for the
Petitioners relating to the use of supervisory guidance. The Petition
expressed concern, however, that the 2018 Statement's reference to not
basing ``criticisms'' on violations of supervisory guidance has led to
confusion about whether MRAs are covered by the 2018 Statement.
Accordingly, the agencies proposed to clarify in the Proposed Rule that
the term ``criticize'' includes the issuance of MRAs and other
supervisory criticisms such as DORs, including those communicated
through matters requiring board attention, documents of resolution, and
supervisory recommendations (collectively,
[[Page 7952]]
supervisory criticisms).\15\ As such, the agencies reiterated that
examiners will not base supervisory criticisms on a ``violation'' of or
``non-compliance with'' supervisory guidance. The agencies noted that,
in some situations, examiners may reference (including in writing)
supervisory guidance to provide examples of safe and sound conduct,
appropriate consumer protection and risk management practices, and
other actions for addressing compliance with laws or regulations. The
agencies also reiterated that they will not issue an enforcement action
on the basis of a ``violation'' of or ``non-compliance'' with
supervisory guidance. The Proposed Rule reflected these
clarifications.\16\
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\15\ The agencies use different terms to refer to supervisory
actions that are similar to MRAs and Matters Requiring Immediate
Attention (MRIAs), including matters requiring board attention,
documents of resolution, and supervisory recommendations.
\16\ The 2018 Statement contains the following sentence:
Examiners will not criticize a supervised financial institution
for a ``violation'' of supervisory guidance.
2018 Statement at 2. As revised in the Proposed Rule, this
sentence read as follows:
Examiners will not criticize (including through the issuance of
matters requiring attention, matters requiring immediate attention,
matters requiring board attention, documents of resolution, and
supervisory recommendations) a supervised financial institution for,
and agencies will not issue an enforcement action on the basis of, a
``violation'' of or ``non-compliance'' with supervisory guidance.
Proposed Rule (emphasis added). As discussed infra in footnote
12, the Proposed Rule also removed the sentences in the 2018
Statement that referred to ``citation,'' which the Petition
suggested had been confusing. These sentences were also removed to
clarify that the focus of the Proposed Rule related to the use of
guidance, not the standards for MRAs.
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The Petition requested further that these supervisory criticisms
should not include ``generic'' or ``conclusory'' references to safety
and soundness. The agencies agreed that supervisory criticisms should
continue to be specific as to practices, operations, financial
conditions, or other matters that could have a negative effect on the
safety and soundness of the financial institution, could cause consumer
harm, or could cause violations of laws, regulations, final agency
orders, or other legally enforceable conditions. Accordingly, the
agencies included language reflecting this practice in the Proposed
Rule.
The Petition also suggested that MRAs, as well as memoranda of
understanding (MOUs), examination downgrades, and any other formal
examination mandate or sanction, should be based only on a violation of
a statute, regulation, or order, including a ``demonstrably unsafe or
unsound practice.'' \17\ As noted in the Proposed Rule, examiners all
take steps to identify deficient practices before they rise to
violations of law or regulation or before they constitute unsafe or
unsound banking practices. The agencies stated that they continue to
believe that early identification of deficient practices serves the
interest of the public and of supervised institutions. Early
identification protects the safety and soundness of banks and credit
unions promotes consumer protection and reduces the costs and risk of
deterioration of financial condition from deficient practices resulting
in violations of laws or regulations, unsafe or unsound conditions, or
unsafe or unsound practices. The Proposed Rule also noted that the
agencies have different supervisory processes, including for issuing
supervisory criticisms. For these reasons, the agencies did not propose
revisions to their respective supervisory practices relating to
supervisory criticisms.
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\17\ The Petition asserted that the federal banking agencies
rely on 12 U.S.C. 1818(b)(1) when issuing MRAs based on safety-and-
soundness matters. Through statutory examination and reporting
authorities, Congress has conferred upon the agencies the authority
to exercise visitorial powers with respect to supervised
institutions. The Supreme Court has indicated support for a broad
reading of the agencies' visitorial powers. See, e.g., Cuomo v.
Clearing House Assn L.L.C., 557 U.S. 519 (2009); United States v.
Gaubert, 499 U.S. 315 (1991); and United States v. Philadelphia Nat.
Bank, 374 U.S. 321 (1963). The visitorial powers facilitate early
identification of supervisory concerns that may not rise to a
violation of law, unsafe or unsound banking practice, or breach of
fiduciary duty under 12 U.S.C. 1818. For credit unions, the
corresponding provision is 12 U.S.C. 1786.
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The agencies also noted that the 2018 Statement was intended to
focus on the appropriate use of supervisory guidance in the supervisory
process, rather than the standards for supervisory criticisms. To
address any confusion concerning the scope of the 2018 Statement, the
Proposed Rule removed two sentences from the 2018 Statement concerning
grounds for ``citations'' and the handling of deficiencies that do not
constitute violations of law.\18\
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\18\ The following sentences from the 2018 Statement were not
present in the Proposed Rule:
Rather, any citations will be for violations of law, regulation,
or non-compliance with enforcement orders or other enforceable
conditions. During examinations and other supervisory activities,
examiners may identify unsafe or unsound practices or other
deficiencies in risk management, including compliance risk
management, or other areas that do not constitute violations of law
or regulation.
2018 Statement at 2. The agencies did not intend these deletions
to indicate a change in supervisory policy.
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Comments on the Proposed Rule
A. NCUA Specific Comments
The NCUA received 13 comments specifically focusing on credit union
concerns about the Proposed Rule. These commenters, which included
national trade associations, state credit union leagues, and credit
unions, generally supported he proposed rule. Six comments were sent
jointly to each regulator, two were from associations that provided
similar comments to the CFPB, and five were comments provided solely to
the NCUA. Topics discussed within the scope of the proposal are issues
addressing the effect and applicability of the guidance. Issues beyond
the scope of the rule addressed coordination with other Federal and
State regulatory authorities, consistency in applying guidance, the
examination cycle, the need for an appeals process, and the need for
the Board to issue more guidance on various topics.
One commenter stated that each guidance statement from the NCUA
should include a notice that it is nonbinding. In addition, the
commenter believed that the NCUA should add a notice to each guidance
statement to support that credit unions are fully permitted to develop
their own approaches to compliance issues, and that the examiner's
recommendations or suggestions do not eliminate the ability of the
credit union to implement its specific solutions.
Aside from expressing general support for the rule, most credit
union specific comments were beyond the scope of the rulemaking. Three
commenters requested that the NCUA improve coordination with respect to
other Federal regulators, especially CFPB and FINCEN. Two commenters
also requested that NCUA improve coordination with state supervisory
authorities. The commenters stated that such enhanced coordination
would help avoid overlapping or consecutive examinations, which they
stated imposes operational burdens and utilizes critical staff member
time. With respect to state guidance, two commenters stated that the
NCUA must ensure state regulators understand how the NCUA will
incorporate state reliance on state guidance into joint examinations or
in alternating examinations where the NCUA may be the lead agency.
Two commenters stated that there should be more consistent
application of the rules and guidance across regions, with examples
provided about BSA/AML and audit reports. One commenter recommended
that the NCUA should create a task force to evaluate
[[Page 7953]]
inconsistent application of guidance comprised of credit union
officials and staff.
One commenter stated that the NCUA Interpretive Rules and Policy
Statements (IRPS) are part exempted interpretive rules and covered
policy statements. NCUA might consider explicitly identifying existing
and future issuances as either covered supervisory guidance or exempt
interpretive rule to provide clarity for stakeholders.
B. Comments to All the Agencies Including the NCUA
In addition, the agencies received 30 comments concerning the
Proposed Rule.\19\ Commenters representing trade associations for
banking institutions and other businesses, state bankers' associations,
individual financial institutions, and one member of Congress expressed
support for the proposed rule. These commenters supported codification
of the 2018 Interagency Statement and the reiteration by the agencies
that guidance does not have the force of law and cannot give rise to
binding, enforceable legal obligations. One of these commenters stated
that the proposal would serve the interests of consumers and
competition by allowing institutions to know what the law is and to
develop innovative products that serve consumers and business clients,
without uncertainty regarding potential regulatory consequences. These
commenters expressed strong support as well for the clarification in
the Proposed Rule that the Agencies will not criticize, including
through the issuance of ``matters requiring attention,'' a supervised
financial institution for a ``violation'' of, or ``non-compliance''
with, supervisory guidance.
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\19\ Of the comments received, some comments were not submitted
to all agencies, some comments were identical, and many comments
were directed at an unrelated rulemaking by the Financial Crimes
Enforcement Network of the Department of the Treasury (FinCEN).
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One commenter agreed with the agencies that supervisory criticisms
should not be limited to violation of statutes, regulations, or order,
including a ``demonstrable unsafe or unsound practice'' and that
supervisory guidance remains a beneficial tool to communicate
supervisory expectations to the industry. The commenter stated that the
proactive identification of supervisory criticism or deficiencies that
do not constitute violations of law facilitates forward-looking
supervision, which helps address problems before they warrant a formal
enforcement action. The commenter noted as well that supervisory
guidance provides important insight to industry and ensures consistency
in the supervisory approach and that supervised institutions frequently
request supervisory guidance. The commenter observed that the pandemic
has amplified the requests for supervisory guidance and interpretation,
and that it is apparent institutions want clarity and guidance from
regulators.
Two commenters, both advocacy groups, opposed the proposed rule,
suggesting that codifying the 2018 Statement may undermine the
important role that supervisory guidance can play by informing
supervisory criticism, rather than merely clarifying that it will not
serve as the basis for enforcement actions. One commenter stated that
it is essential for agencies to have the prophylactic authority to base
criticisms on improper practices by financial institutions that may not
yet have ripened into violations of law or significant safety and
soundness concerns. The commenter stated that this is particularly
important with respect to large banks, where delay in addressing
concerns could lead to a broader crisis. One commenter stated that the
agencies have not explained the benefits that would result from the
rule or demonstrated how the rule will promote safety and soundness or
consumer protection. The commenter argued that supervision is different
from other forms of regulation and requires supervisory discretion,
which could be constrained by the rule. One of these commenters argued
that the proposal would send a signal that financial institutions have
wider discretion to ignore supervisory guidance.
B. Scope of Rule
Several commenters requested that the Proposed Rule cover
interpretive rules and clarify that interpretive rules do not have the
force and effect of law. One commenter stated that the agencies should
clarify whether they believe that interpretive rules can be binding.
The commenter argued that, under established legal principles,
interpretive rules can be binding on the issuing agency but not on the
public. Some commenters suggested that the agencies follow ACUS
recommendations for issuing interpretive rules and that the agencies
should clarify when particular guidance documents are or are not
interpretive rules and allow the public to petition and change an
interpretation. A number of commenters requested that the agencies
expand the statement to address the standards that apply to MRAs and
other supervisory criticisms such as DORs, a suggestion made in the
Petition.
C. Role of Guidance Documents
Several commenters recommended that the agencies clarify that the
practices described in supervisory guidance are merely examples of
compliant conduct, not expectations that may form the basis for
supervisory criticism. One commenter suggested that the agencies state
that when agencies offer examples of safe and sound conduct, compliance
with consumer protection standards, appropriate risk management
practices, or acceptable practices through supervisory guidance or
interpretive rules, the Agencies will treat adherence to that
supervisory guidance or interpretive rule as deemed compliance. One
commenter also requested that the agencies make clear that guidance
that goes through public comment, as well as any examples used in
guidance, are not binding. The commenter also requested that the
agencies affirm that they will apply statutory factors while processing
applications.
One commenter argued that guidance provides valuable information to
supervisors about how their discretion should be exercised and
therefore plays an important role in supervision. According to this
commenter, 12 U.S.C. 1831p-1 and 12 U.S.C. 1818 recognize the
discretionary power conferred on banking agencies separate from the
power to issue regulations. The commenter noted that, pursuant to these
statutes, regulators may issue cease and desist orders based on a
reasonable cause to believe that an institution has engaged, is
engaging or is about to engage in an unsafe and unsound practice,
separately and apart from whether the institution has technically
violated a law or regulation. The commenter added that Congress
entrusted the agencies with the power to determine whether practices
are unsafe and unsound and attempt to halt such practices through
supervision, even if a specific case may not constitute a violation of
a written law or regulation.
D. Supervisory Criticisms
Several commenters addressed supervisory criticisms and how they
relate to guidance. Commenters suggested that supervisory criticisms
should be specific as to practices, operations, financial conditions,
or other matters that could have a negative effect. Commenters
suggested that MRAs, memoranda of understanding and any other formal
written mandates or sanctions should be based only on a violation of a
statute or regulation. Similarly, commenters argued that there should
be no references to guidance in
[[Page 7954]]
written formal actions and that banking institutions should be
reassured that they will not be criticized or cited for a violation of
guidance when no law or regulation is cited. One commenter suggested
that it would instead be appropriate to discuss supervisory guidance
privately, rather than publicly, potentially during the pre-exam
meetings or during examination exit meetings. Another commenter
suggested that, while referencing guidance in supervisory criticism may
be useful at times, agencies should provide safeguards to prevent such
references from becoming the de facto basis for supervisory criticisms.
One commenter suggested that examiners also should not criticize
community banks in their final written examination reports for not
complying with ``best practices'' unless the criticism involves a
violation of bank policy or regulation. The commenter added that
industry best practices should be transparent enough and sufficiently
known throughout the industry before they are cited in an examination
report. One commenter requested that examiners should not apply large
bank practices to community banks that have a different, less complex
and more conservative business model. One commenter asserted that MRAs
should not be based on ``reputational risk,'' but rather the underlying
conduct giving rise to concerns should be the basis for an MRA and
asked the agencies to address this in the final rule.
Commenters that opposed the proposal did not support restricting
supervisory criticism or sanctions to explicit violations of law or
regulation. One commenter expressed concern that requiring supervisors
to wait for an explicit violation of law before issuing criticism would
effectively erase the line between supervision and enforcement. One
commenter emphasized the importance of bank supervisors basing their
criticisms on imprudent bank practices that may not yet have ripened
into violations of laws or rules but which if left unaddressed could
undermine safety and soundness or pose harm to consumers.
One commenter argued that the agencies should state clearly that
guidance can and will be used by supervisors to inform their
assessments of banks' practices; that it may be cited as, and serve as
the basis for, criticisms. According to the commenter, even under the
``well-established law'' described in the proposal, it is quite
permissible for guidance to be used as a set of standards that may
indeed inform a criticism, provided that application of the guidance is
used for corrective purposes, if not to support an enforcement action.
According to one commenter, the proposal makes fine conceptual
distinctions between, for example, issuing supervisory criticisms ``on
the basis of'' guidance (which is apparently forbidden) and issuing
supervisory criticisms that make ``reference'' to supervisory guidance
(which continues to be permitted). The commenter suggested that is a
distinction that it may be difficult for people to parse in practice.
According to the commenter, a rule that makes such a distinction is
likely to have a chilling effect on supervisors attempting to implement
policy in the field. According to another commenter, the language
allowing examiners to reference supervisory guidance to provide
examples is too vague and threatens to marginalize the role of guidance
to the point that it becomes almost useless in the process of issuing
criticisms designed to correct deficient bank practices.
E. Legal Authority and Visitorial Powers
One commenter questioned the agencies' reference in the proposal to
visitorial powers as an additional authority for early identification
of supervisory concerns that may not rise to a violation of law, unsafe
or unsound banking practice, or breach of fiduciary.
F. Issuance and Management of Supervisory Guidance
Several commenters made suggestions about how the agencies should
issue and manage supervisory guidance. Some comments suggested that the
agencies should clearly delineate between regulations and supervisory
guidance. Commenters encouraged the agencies to regularly review,
update, and potentially rescind outstanding guidance. One commenter
suggested that the agencies rescind outstanding guidance that functions
as a rule but has not gone through notice and comment. One commenter
suggested that the agencies memorialize their intent to revisit and
potentially rescind existing guidance, as well as limit multiple
guidance documents on the same topic. Commenters suggested that
supervisory guidance should be easy to find, readily available, online,
and in a format that is user-friendly and searchable.
One commenter encouraged the agencies to issue principles-based
guidance that does not contain the kind of granularity that could be
misconstrued as binding expectations. According to this commenter, the
agencies can issue separate FAQs with more detailed information but
should clearly identify these as non-binding illustrations. This
commenter also encouraged the agencies to publish proposed guidance for
comment when circumstances allow. One commenter expressed concern that
the agencies will aim to reduce the issuances of multiple supervisory
guidance documents and will thereby reduce the availability of guidance
in circumstances where guidance would be valuable.
Responses to Comments
As stated in the Proposed Rule, the 2018 Statement was intended to
focus on the appropriate use of supervisory guidance in the supervisory
process, rather than the standards for supervisory criticisms. The
standards for issuing MRAs and other supervisory actions such as DORs
were, therefore, outside the scope of this rulemaking. For this reason,
and for reasons discussed earlier, the final rule does not address the
standards for MRAs and other supervisory actions such as DORs.
Similarly, because the NCUA is not addressing approaches to supervisory
criticism in the final rule, including any criticism related to
reputation risk, the final rule does not include standards for
supervisory criticisms relating to ``reputation risk.''
With respect to the comments on coverage of interpretive rules, the
NCUA agrees with the commenter that interpretive rules do not, alone,
``have the force and effect of law'' and must be rooted in, and derived
from, a statute or regulation.\20\ While interpretive rules and
supervisory guidance are similar in lacking the force and effect of
law, interpretive rules and supervisory guidance are distinct under the
APA and its jurisprudence and are generally issued for different
purposes.\21\ Interpretive rules are typically issued by
[[Page 7955]]
an agency to advise the public of the agency's construction of the
statutes and rules that it administers,\22\ whereas general statements
of policy, such as supervisory guidance, advise the public of how an
agency intends to exercise its discretionary powers.\23\ To this end,
guidance generally reflects an agency's policy views, for example, on
practices on safe and sound risk management. On the other hand,
interpretive rules generally resolve ambiguities regarding what
statutes and regulations require. Because supervisory guidance and
interpretive rules have different characteristics and serve different
purposes, the NCUA is adopting the proposed rule's coverage of
supervisory guidance only.
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\20\ See Mortgage Bankers Association, 575 U.S. at 96.
\21\ Questions concerning the legal and supervisory nature of
interpretive rules are case-specific and have engendered debate
among courts and administrative law commentators. The NCUA takes no
position in this rulemaking on those specific debates. See, e.g., R.
Levin, Rulemaking and the Guidance Exemption, 70 Admin. L. Rev. 263
(2018) (discussing the doctrinal differences concerning the status
of interpretive rules under the APA); see also Nicholas R. Parillo,
Federal Agency Guidance and the Powder to Bind: An Empirical Study
of Agencies and Industries, 36 Yale J. Reg 165, 168 n.6 (2019)
(``Whether interpretive rules are supposed to be nonbinding is a
question subject to much confusion that is not fully settled''); see
also ACUS, Recommendation 2019-1, Agency Guidance Through
Interpretive Rules (Adopted June 13, 2019), available at https://www.acus.gov/recommendation/agency-guidance-through-interpretive-rules (noting that courts and commentators have different views on
whether interpretive rules bind an agency and effectively bind the
public through the deference given to agencies' interpretations of
their own rules under Auer v. Robbins, 519 U.S. 452 (1997)).
\22\ Mortgage Bankers Association, 575 U.S. at 97 (citing
Shalala v. Guernsey Memorial Hospital, 514 U.S. 87, 99 (1995));
accord Attorney General's Manual at 30 n.3.
\23\ See Chrysler v. Brown, 441 U.S. at 302 n.31 (quoting
Attorney General's Manual at 30 n.3); see also, e.g., American
Mining Congress v. Mine Safety & Health Administration, 995 F.2d
1106, 1112 (D.C. Cir. 1993) (outlining tests in the D.C. Circuit for
assessing whether an agency issuance is an interpretive rule).
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With respect to the question of whether to adopt ACUS's procedures
for allowing the public to request reconsideration or revision of an
interpretive rule, this rulemaking, again, does not address
interpretive rules. As such, the NCUA is not adding procedures for
challenges to interpretive rules through this rulemaking.
In response to the comment that the agencies treat examples in
guidance as ``safe harbors,'' the NCUA agrees that examples offered in
guidance may provide reassurance about practices that, in general, may
lead to safe and sound operation and compliance with regulations and
statutes. The examples in guidance, however, are typically generalized.
The question of whether the employment of the examples meets
supervisory goals requires consideration of how an institution applies
those examples under the facts and circumstances. In addition, the
underlying legal principle of guidance is that it does not created
binding legal obligation for either the public or an agency. As such,
the NCUA does not intend to deem examples in guidance as categorically
setting safe harbors.\24\
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\24\ The question of whether an example in guidance can provide
a safe harbor would also likely not be a logical outgrowth of the
proposed rule.
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In response to the comment that the proposal may undermine the
important role that supervisory guidance can play by informing
supervisory criticism and by serving to address conditions before those
conditions lead to enforcement actions, the NCUA agrees that the
appropriate use of guidance supports a more collaborative and
constructive regulatory process that supports the safety and soundness
of institutions and diminishes the need for enforcement actions. In
addition, as noted by ACUS, guidance can make agency decision-making
more predictable and uniform and shield regulated parties from unequal
treatment, unnecessary costs, and unnecessary risk, while promoting
compliance with the law. The NCUA intends, therefore, to continue using
guidance to bolster the supervisory process. The NCUA does not view the
final rule as weakening the role of guidance in the supervisory
process. Further, the NCUA will continue to use guidance in a robust
way to support the safety and soundness of credit unions. In response
to the related question from these commenters, which suggested there is
no basis for the rule, the NCUA notes the question of the role of
guidance has been one of interest to regulated parties and other
stakeholders over the past few years. The Petition is evidence of this
interest. As such, the NCUA believes it will serve the public interest
to reaffirm the appropriate role of supervisory guidance.
With respect to the comment that visitorial powers do not provide
the authority to issue supervisory criticisms like DORs, the NCUA
disagrees. The visitorial powers of financial regulators are well-
established. The Supreme Court's decision in Cuomo v. Clearing House
Assn L.L.C. explained that the visitation included the ``exercise of
supervisory power.'' \25\ The Court ruled that the ``power to enforce
the law exists separate and apart from the power of visitation.'' \26\
While the Cuomo decision involved the question of which powers may be
exercised by state governments (and ruled that states could exercise
law enforcement powers but could not exercise visitorial powers), the
decision did not dispute that the Federal agencies possess both these
powers. The Court in Cuomo explained that visitorial powers entailed
``oversight and supervision,'' while the Court's earlier decision in
Watters v. Wachovia Bank, N.A. explained that visitorial powers
entailed ``general supervision and control.'' \27\ Accordingly,
visitorial powers include the power to issue supervisory criticisms
independent of the agencies' authority to enforce applicable laws or
ensure safety and soundness. For these reasons, the NCUA reaffirms the
statement in the preamble to the Proposed Rule that such visitorial
powers have been conferred through statutory examination and reporting
authorities, which facilitate the NCUA's identification of supervisory
concerns that may not rise to a violation of law, unsafe or unsound
practice, or breach of fiduciary duty under 12 U.S.C. 1786. In the case
of the federal banking agencies, such statutory examination and
reporting authorities pre-existed 12 U.S.C. 1786, which neither
superseded nor replaced such authorities. Each of the agencies has been
vested with statutory examination and reporting authorities with
respect to institutions under its supervision.\28\
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\25\ 557 U.S. 519, 536 (2009).
\26\ Id. at 533.
\27\ 550 U.S. 1, 127 (2007).
\28\ The commenter's reading of the agencies' examination and
reporting authorities would assert that the agencies may examine
supervised institutions and require reports, but not make findings
based on such examinations and reporting, unless the finding is
sufficient to warrant a formal enforcement action under the standard
set out in 12 U.S.C. 1818 for banks. This reading is inconsistent
with the history of federal financial supervision, including as
described in the cases cited in the Proposed Rule.
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In response to the commenter's request regarding guidance issued
for public comment, the NCUA notes that it has made clear through the
2018 Statement and in this final rule that supervisory guidance
(including guidance that goes through public comment) does not create
binding, enforceable legal obligations. Rather, the NCUA issues
guidance for comment in order to improve its understanding of an issue,
gather information, or seek ways to achieve a supervisory objective
most effectively. Similarly, examples that are included in supervisory
guidance are not binding on institutions. Rather, these examples are
intended to be illustrative of ways a supervised institution may
implement safe and sound practices, appropriate consumer protection,
prudent risk management, or other actions to comply with laws or
regulations.
With respect to the commenter's request that the agencies affirm
that they will apply statutory factors while processing applications,
the NCUA affirms that the agency will continue to consider and apply
all applicable statutory factors when processing applications.
In response to the question raised by some commenters concerning
potential confusion between guidance and interpretive rules, the NCUA
notes that interpretive rules are outside the scope of the rulemaking.
In addition, as stated earlier, while both guidance and interpretive
rules serve different purposes, both lack the force and effect of law.
Interpretive rules must be rooted
[[Page 7956]]
in the statutes and regulations those rules interpret. As for
identification of these documents, the NCUA generally does, identify
guidance and interpretive rules and will continue to do so going
forward.
In response to the two commenters opposing the Proposal, this final
rule does not undermine any of the NCUA's safety and soundness
authorities. Indeed, the final rule is designed to solidify the NCUA's
ability to enforce the very matters of most importance. In addition,
the NCUA notes the question of the role of guidance has been one of
interest to regulated parties and other stakeholders over the past few
years. The Petition is evidence of this interest. As such, the NCUA
believes it will serve the public interest to reaffirm the appropriate
role of supervisory guidance. Therefore, the NCUA is proceeding with
the rule as proposed.
One credit union commenter stated that examiners should only use
regulatory requirements as the basis to assess credit union operations,
and afford credit unions the opportunity to demonstrate that their
practices, which may deviate from the examples provided in supervisory
guidance, nonetheless constitute safe and sound practices that meet
regulatory requirements. The NCUA notes that the final rule clearly
indicates that examiners will not criticize a supervised financial
institution for, and the NCUA will not issue an enforcement action on
the basis of, a ``violation'' of or ``non-compliance'' with supervisory
guidance. Nevertheless, examiners may reference supervisory guidance to
provide examples of safe and sound practices, appropriate consumer
protection and risk management practices, and other actions for
addressing compliance with laws or regulations.
Another commenter requested that all supervisory guidance be
published for public comment before being issued. The commenter argued
that this process would reinforce the nature of the guidance and
provide credit unions a role in helping to achieve vetted guidance that
is useful to their operations. The NCUA does not agree with this
comment as publishing each supervisory guidance for public comment
would prevent it from being issued timely to provide examples of safe
and sound practices, appropriate consumer protection and risk
management practices, and other actions for addressing compliance with
laws or regulations where applicable. As stated in response to other
comments, the NCUA's position is the underlying legal principal of
guidance is that it does not create a binding legal obligation for
either the public or an agency.
One comment stated that the NCUA should include a notice in each
supervisory guidance indicating that it is nonbinding. The NCUA
believes such a notice is not necessary, given that the final rule
reflects the NCUA's position that the underlying legal principal of
supervisory guidance is that it does not created binding legal
obligation for either the public or an agency.
One comment recommended identifying existing and future issuances
of NCUA Interpretive Rules and Policy Statements (IRPS) as either a
covered supervisory guidance or an exempt interpretive rule to provide
clarity for credit unions. The NCUA reiterates that interpretive rules
are outside the scope of this rulemaking. However, as stated in the
proposed rule, while both guidance and interpretive rules serve
different purposes, both lack the force and effect of law. As for
identification of NCUA IRPS issuances, the NCUA generally does identify
guidance and interpretive rules and will continue to do so going
forward.
Comments Beyond the Scope of the Rulemaking
Most comments by credit union affiliated commenters were beyond the
scope of the rulemaking, including the need for coordination with other
Federal and State regulatory authorities, consistency in applying
guidance, the examination cycle, the need for an appeals process, and
the need for the Board to issue more guidance on various topics. Given
that these comments addressed issues not relevant to the guidance
rulemaking, the NCUA has determined that it is more appropriate to
assess them outside the context of this rulemaking. Nevertheless, the
Board agrees with the commenters that is important to enhance
coordination with other regulatory authorities and apply guidance
consistently.
III. The Final Rule
For the reasons discussed above, the final rule adopts the Proposed
Rule without change. However, the NCUA has decided to issue a final
rule that is specifically addressed to the NCUA and NCUA-supervised
institutions, rather than the joint version that the five agencies
included in their joint Proposal. Although many of the comments were
applicable to all of the agencies, some comments were specific to
particular agencies or to groups of agencies. Having separate final
rules has enabled agencies to better focus on explaining any agency-
specific issues to their respective audiences of supervised
institutions and agency employees.
IV. Administrative Law Matters
A. Paperwork Reduction Act Analysis
The Paperwork Reduction Act of 1995 \29\ (PRA) states that no
agency may conduct or sponsor, nor is the respondent required to
respond to, an information collection unless it displays a currently
valid Office of Management and Budget (OMB) control number. The NCUA
has reviewed this final rule and determined that it does not contain
any information collection requirements subject to the PRA.
Accordingly, no submissions to OMB will be made with respect to this
final rule.
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\29\ 44 U.S.C. 3501-3521.
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B. Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act (RFA) generally requires that, in
connection with a notice of proposed rulemaking, an agency prepare and
make available for public comment an initial regulatory flexibility
analysis that describes the impact of a proposed rule on small
entities. A regulatory flexibility analysis is not required, however,
if the agency certifies that the rule will not have a significant
economic impact on a substantial number of small entities (defined by
the NCUA for purposes of the RFA to include federally insured credit
unions with assets less than $100 million) \30\ and publishes its
certification and a short, explanatory statement in the Federal
Register together with the rule. This rule will not impose any
obligations on federally insured credit unions, and regulated entities
will not need to take any action in response to this rule. The NCUA
certifies that the rule will not have a significant economic impact on
a substantial number of small entities. The NCUA received no comments
in response to its request for comments on this analysis.
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\30\ NCUA Interpretive Ruling and Policy Statement (IRPS) 87-2,
as amended by IRPS 03-2 and 15-1, available at https://www.ncua.gov/files/publications/irps/IRPS1987-2.pdf.
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C. Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests. In
adherence to fundamental federalism principles, the NCUA, an
independent regulatory agency as defined in 44 U.S.C. 3502(5),
voluntarily complies with the executive order. This rule will not have
a substantial direct effect on the states, on the connection between
the national government and the states, or on the
[[Page 7957]]
distribution of power and responsibilities among the various levels of
government. The NCUA has determined this rule does not constitute a
policy that has federalism implications for purposes of the executive
order.
D. Assessment of Federal Regulations and Policies on Families
The NCUA has determined that this proposed rule will not affect
family well-being within the meaning of Section 654 of the Treasury and
General Government Appropriations Act, 1999.\31\
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\31\ Public Law 105-277, 112 Stat. 2681 (1998).
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E. Congressional Review Act
For purposes of Congressional Review Act, the OMB makes a
determination as to whether a final rule constitutes a ``major''
rule.\32\ If a rule is deemed a ``major rule'' by the OMB, the
Congressional Review Act generally provides that the rule may not take
effect until at least 60 days following its publication.\33\
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\32\ 5 U.S.C. 801 et seq.
\33\ 5 U.S.C. 801(a)(3).
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The Congressional Review Act defines a ``major rule'' as any rule
that the Administrator of the Office of Information and Regulatory
Affairs of the OMB finds has resulted in or is likely to result in (A)
an annual effect on the economy of $100,000,000 or more; (B) a major
increase in costs or prices for consumers, individual industries,
Federal, State, or local government agencies or geographic regions, or
(C) significant adverse effects on competition, employment, investment,
productivity, innovation, or on the ability of United States-based
enterprises to compete with foreign-based enterprises in domestic and
export markets.\34\ As required by the Congressional Review Act, the
NCUA will submit the final rule and other appropriate reports to
Congress and the Government Accountability Office for review.
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\34\ 5 U.S.C. 804(2).
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List of Subjects in 12 CFR Part 791
Administrative practice and procedure, Credit unions, Sunshine Act.
By the National Credit Union Administration Board on January 19,
2021.
Melane Conyers-Ausbrooks,
Secretary of the Board.
National Credit Union Administration
12 CFR Chapter VII
Authority and Issuance
For the reasons stated in the preamble, 12 CFR part 791 is amended
as follows:
PART 791--RULES OF NCUA BOARD PROCEDURE; PROMULGATION OF NCUA RULES
AND REGULATIONS; OBSERVANCE OF NCUA BOARD MEETINGS
0
1. The authority citation for part 791 is revised to read as follows:
Authority: 12 U.S.C. 1766, 1781, 1786, 1787, 1789, and 5 U.S.C.
552b.
0
2. Subpart D is added to part 791 to read as follows:
Subpart D--Use of Supervisory Guidance
Sec.
791.19 Purpose.
791.20 Implementation of the Interagency Statement.
791.21 Rule of construction.
Appendix A to Subpart D--Statement Clarifying the Role of
Supervisory Guidance
Subpart D--Use of Supervisory Guidance
Sec. 791.19 Purpose.
The NCUA issues regulations and guidance as part of its supervisory
function. This subpart reiterates the distinctions between regulations
and guidance, as stated in the Interagency Statement Clarifying the
Role of Supervisory Guidance (Interagency Statement) and provides that
the Statement is binding on the NCUA.
Sec. 791.20. Implementation of the Interagency Statement.
The Statement describes the official policy of the NCUA with
respect to the use of supervisory guidance in the supervisory process.
The Statement is binding on the NCUA.
Sec. 791.21 Rule of construction.
Appendix A to this subpart does not alter the legal status of
guidance that is authorized by statute, including but not limited to 12
U.S.C. 1781, 1786, and 1789, to create binding legal obligations.
Appendix A to Subpart D--Statement Clarifying the Role of Supervisory
Guidance
Statement Clarifying the Role of Supervisory Guidance
The National Credit Union Administration is responsible for
promoting safety and soundness and effective consumer protection at
Federal credit unions. The NCUA is issuing this statement to explain
the role of supervisory guidance and to describe its approach to
supervisory guidance.
Difference Between Supervisory Guidance and Laws or Regulations
(1) The NCUA issue various types of supervisory guidance,
including interagency statements, advisories, bulletins, policy
statements, questions and answers, and frequently asked questions,
to their respective supervised institutions. A law or regulation has
the force and effect of law.\1\ Unlike a law or regulation,
supervisory guidance does not have the force and effect of law, and
the NCUA do not take enforcement actions based on supervisory
guidance. Rather, supervisory guidance outlines the NCUA's
supervisory expectations or priorities and articulates the agency's
general views regarding appropriate practices for a given subject
area. Supervisory guidance often provides examples of practices that
the agency generally considers consistent with safety-and-soundness
standards or other applicable laws and regulations, including those
designed to protect consumers. Supervised institutions at times
request supervisory guidance, and such guidance is important to
provide insight to industry, as well as supervisory staff, in a
transparent way that helps to ensure consistency in the supervisory
approach.
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\1\ Government agencies issue regulations that generally have
the force and effect of law. Such regulations generally take effect
only after the agency proposes the regulation to the public and
responds to comments on the proposal in a final rulemaking document.
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Ongoing Agency Efforts To Clarify the Role of Supervisory Guidance
(2) The NCUA is clarifying the following policies and practices
related to supervisory guidance:
(i) The NCUA intends to limit the use of numerical thresholds or
other ``bright-lines'' in describing expectations in supervisory
guidance. Where numerical thresholds are used, the NCUA intends to
clarify that the thresholds are exemplary only and not suggestive of
requirements. The agency will continue to use numerical thresholds
to tailor, and otherwise make clear, the applicability of
supervisory guidance or programs to supervised institutions, and as
required by statute.
(ii) Examiners will not criticize (through the issuance of
matters requiring attention, matters requiring immediate attention,
matters requiring board attention, documents of resolution, and
supervisory recommendations) a supervised financial institution for,
and the NCUA will not issue an enforcement action on the basis of, a
``violation'' of or ``non-compliance'' with
[[Page 7958]]
supervisory guidance. In some situations, examiners may reference
(including in writing) supervisory guidance to provide examples of
safe and sound conduct, appropriate consumer protection and risk
management practices, and other actions for addressing compliance
with laws or regulations.
(iii) Supervisory criticisms should continue to be specific as
to practices, operations, financial conditions, or other matters
that could have a negative effect on the safety and soundness of the
financial institution, could cause consumer harm, or could cause
violations of laws, regulations, final agency orders, or other
legally enforceable conditions.
(iv) The NCUA also has at times sought, and may continue to
seek, public comment on supervisory guidance. Seeking public comment
on supervisory guidance does not mean that the guidance is intended
to be a regulation or have the force and effect of law. The comment
process helps the agency to improve its understanding of an issue,
to gather information on institutions' risk management practices, or
to seek ways to achieve a supervisory objective most effectively and
with the least burden on institutions.
(v) The NCUA will aim to reduce the issuance of multiple
supervisory guidance documents on the same topic and will generally
limit such multiple issuances going forward.
(3) The NCUA will continue efforts to make the role of
supervisory guidance clear in their communications to examiners and
to supervised financial institutions and encourage supervised
institutions with questions about this statement or any applicable
supervisory guidance to discuss the questions with their appropriate
agency contact.
[FR Doc. 2021-01867 Filed 2-2-21; 8:45 am]
BILLING CODE 7535-01-P
