Guidelines for Appeals of Material Supervisory Determinations
Notice and request for comment.
RIN Number: "RIN 3064-ZA20"
Citation: "87 FR 64034"
Page Number: "64034"
"Notices"
Agency: "
SUMMARY: The
DATES: Written comments must be received by the
ADDRESSES: Interested parties are invited to submit written comments, identified by RIN 3064-ZA20, by any of the following methods:
* Agency Website: https://www.fdic.gov/resources/regulations/federal-register-publications/. Follow the instructions for submitting comments.
* Email: [email protected]. Include "Guidelines for Appeals of Material Supervisory Determinations--RIN 3064-ZA20" in the subject line of the message.
* Mail:
* Hand Delivery/Courier: Guard station at the rear of the
* Public Inspection: Comments received, including any personal information provided, may be posted without change to https://www.fdic.gov/resources/regulations/federal-register-publications/. Commenters should submit only information that the commenter wishes to make available publicly. The
FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION: The
I. Background
Section 309(a) of the
FOOTNOTE 1 12 U.S.C. 4806(a). END FOOTNOTE
FOOTNOTE 2 12 U.S.C. 4806(f)(2). END FOOTNOTE
FOOTNOTE 3 12 U.S.C. 4806(b). END FOOTNOTE
In 1995, the
FOOTNOTE 4 60 FR 15923 (
In
FOOTNOTE 5 86 FR 6880 (
Earlier this year, the
FOOTNOTE 6 87 FR 30942 (
The revised Guidelines also included procedural changes to reflect the restoration of the SARC structure, such as granting specific authorities to the SARC Chairperson. The
While the revised Guidelines were effective on
II. Discussion of Comments
The
Restoration of SARC Structure
Commenters generally disagreed with the restoration of the SARC structure and the
Commenters also raised the concern that the SARC structure may not provide the intended balancing of perspectives, given the current composition of the
Some commenters recommended that the
Ombudsman's Role
As noted above, the
Communications
The revised Guidelines eliminated a provision that was added specifically to accommodate the
Standard of Review
A commenter recommended that the
Stay of Material Supervisory Determinations
A financial holding company recommended that the
FOOTNOTE 7 See OCC Bulletin 2013-15. END FOOTNOTE
III. Proposed Guidelines
The
SARC Structure
Review of material supervisory determinations by a Board-level committee such as the SARC promotes greater accountability in the supervisory appeals process. Ultimate responsibility for the
Hiring individuals from outside the agency represented a significant departure from the
Review of material supervisory determinations by the SARC also promotes independence from the usual supervisory or examination channels in a manner consistent with the Riegle Act. As provided by the statute, independent review means review "by an agency official who does not directly or indirectly report to the agency official who made the material supervisory determination under review." /8/ Members of the
FOOTNOTE 8 12 U.S.C. 4806(f)(2). END FOOTNOTE
In terms of timing, comment was not solicited prior to restoring the SARC structure because, at that time, there were no pending appeals, and the new Office had not yet been utilized in any cases. The
The
The
FOOTNOTE 9 12 U.S.C. 4806(d). The
Some of the Federal banking agencies have in place procedures to settle disputes between the agency and a financial institution that may satisfy the requirements of this provision. In addition, some agencies, for example, the Comptroller of the Currency, may already have appointed an ombudsman to hear appeals. Nothing in this section is intended to interfere with such existing programs.
H.R. Conf. Rep. 103-652 at 171. The
FOOTNOTE 10 The
The
Consistent with the proposed addition of the Ombudsman to the SARC as a non-voting member, the
The
Commenters also expressed concern about possible retaliatory actions if an IDI submits a supervisory appeal. Due to these concerns, the
Communications
The
FOOTNOTE 11 The provision could have been read broadly, for example, to require the sharing of all communications about pending or ongoing enforcement actions in the event a bank were to file a supervisory appeal. END FOOTNOTE
FOOTNOTE 12 For example, the disclosure of confidential supervisory information and certain other types of information is restricted under 12 CFR part 309. Thus, to the extent that materials shared with the SARC include such confidential supervisory information relating to another IDI, for example, that material could be redacted. END FOOTNOTE
Standard of Review
As noted above, a commenter recommended that the
FOOTNOTE 13 86 FR 6880, 6883 (
FOOTNOTE 14 Id. END FOOTNOTE
The
FOOTNOTE 15 See
Neither agency's process provides for a de novo standard at the final level of review. Rather, the
FOOTNOTE 16 See
Stay of Material Supervisory Determinations
As noted above, a financial holding company recommended that the
FOOTNOTE 17 See OCC Bulletin 2013-15. END FOOTNOTE
The
FOOTNOTE 18 See 82 FR 34522, 34526 (
Request for Comment
The
For the reasons set out in the preamble, the
Guidelines for Appeals of Material Supervisory Determinations
A. Introduction
Section 309(a) of the
B. SARC Membership
The following individuals comprise the three (3) voting members of the SARC: (1) One inside FDIC Board member, either the Chairperson, the Vice Chairperson, or the FDIC Director (Appointive), as designated by the FDIC Chairperson (this person would serve as the Chairperson of the SARC); and (2) one deputy or special assistant to each of the inside FDIC Board members who are not designated as the SARC Chairperson. The General Counsel and the Ombudsman are non-voting members of the SARC. The FDIC Chairperson may designate alternate member(s) to the SARC if there are vacancies so long as the alternate member was not involved in making or affirming the material supervisory determination under review. A member of the SARC may designate and authorize a member of his or her staff within the member's area of responsibility related to cases before the SARC to act on his or her behalf.
C. Institutions Eligible To Appeal
The Guidelines apply to the insured depository institutions that the
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 Rating System for Information Technology;
(c) Trust ratings under the Uniform Interagency Trust Rating System;
(d) CRA ratings under the Revised Uniform Interagency Community Reinvestment Act Assessment Rating System;
(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 appropriateness 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
(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
(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
(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
(4) Additional Appeal Rights:
(a) In the case of any written notice from the
(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
(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
(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
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),
(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 or senior management has considered the merits of the request and has authorized that it be filed. Senior management is defined as the core group of individuals directly accountable to the board of directors for the sound and prudent day-to-day management of the institution. If an institution's senior management files an appeal, it must inform the board of directors of the substance of the appeal before filing and keep the board of directors informed of the appeal's status.
(2) Within 45 calendar days after receiving a request for review described in paragraph (1), the Division Director will:
(a) review the appeal, considering whether the material supervisory determination is consistent with applicable laws, regulations, and policy, make his or her own supervisory determination without deferring to the judgments of either party, 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 SARC 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 SARC.
(3) No appeal to the SARC 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 SARC and will provide the mailing address for any appeal the institution may wish to file.
(5) The Division Director may request guidance from the SARC Chairperson or the Legal Division as to procedural or other questions relating to any request for review.
G. Appeal to the SARC
An institution that does not agree with the written determination rendered by the Division Director may appeal that determination to the SARC within 30 calendar days after the date of receipt of that determination. Failure to file within the 30-day time limit may result in denial of the appeal by the SARC.
1. Filing With the SARC
An appeal to the SARC will be considered filed if the written appeal is received by the
2. Contents of Appeal
The appeal should be labeled to indicate that it is an appeal to the SARC 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. If expedited review is requested, the appeal should state the reason for the request. Only matters submitted to the appropriate Division Director in a request for review may be appealed to the SARC. Evidence not presented for review to the Division Director is generally not permitted; such evidence may be submitted to the SARC only if approved by the SARC Chairperson 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 SARC 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. Submission From the Division Director
The Division Director may submit views regarding the appeal to the SARC within 30 calendar days of the date on which the appeal is received by the SARC.
5. Oral Presentation
The SARC will, if a request is made by the institution or by
6. Consolidation, Dismissal, and Rejection
Appeals based upon similar facts and circumstances may be consolidated for expediency. An appeal may be dismissed by the SARC 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 SARC 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 SARC will be an appellate body and will make independent supervisory determinations. The SARC will review the appeal for consistency with the policies, practices, and mission of the
8. Other Communications
Materials considered by the SARC will be shared with both parties to the appeal, subject to applicable legal limitations on disclosure. The Ombudsman will verify that both parties have received all materials considered by the SARC.
H. Publication of Decisions
Decisions of the SARC will be published as soon as practicable, and the published decisions will be redacted to avoid disclosure of the name of the appealing institution and any information exempt from disclosure under the Freedom of Information Act and the
I. Appeal Guidelines Generally
Appeals to the SARC will be governed by these Guidelines. The SARC, with the concurrence of the Legal Division, will retain discretion to waive any provision of the Guidelines for good cause. Supplemental rules governing the SARC's operations may be adopted.
Institutions may request extensions of the time period for submitting appeals under these Guidelines from either the appropriate Division Director or the SARC Chairperson, as appropriate. If a filing under these Guidelines is due on a Saturday, Sunday, or a Federal holiday, the filing may be made on the next business day.
Institutions may request from the appropriate Division Director a stay of a supervisory action or determination while an appeal of that determination is pending. The request must be in writing and include the reason(s) for the stay. The Division Director has discretion to grant a stay and will generally decide whether to grant a stay within 21 days of receiving the institution's request. The Division Director may grant a stay subject to conditions, including time limitations, where appropriate.
J. 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
K. 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
L. Effect on Applications or Requests for Approval
Any application or request for approval made to the
M. Prohibition on Examiner Retaliation
The
Institutions that believe they have been retaliated against are encouraged to contact the Regional Director for the appropriate
By order of the Board of Directors.
Dated at
Assistant Executive Secretary.
[FR Doc. 2022-22946 Filed 10-20-22;
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