Notice2022-27351
Guidelines for Appeals of Material Supervisory Determinations
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 16, 2022
Issuing agencies
Federal Deposit Insurance Corporation
Abstract
On December 13, 2022, the Federal Deposit Insurance Corporation adopted revised Guidelines for Appeals of Material Supervisory Determinations (Guidelines). The revisions expand and clarify the role of the agency's Ombudsman, adding the Ombudsman to the Supervision Appeals Review Committee as a non-voting member, and require that materials considered by the Supervision Appeals Review Committee be shared with both parties to the appeal on a timely basis, subject to applicable legal limitations on disclosure. In addition, the revised Guidelines allow insured depository institutions to request a stay of a material supervisory determination while an appeal is pending.
Full Text
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<title>Federal Register, Volume 87 Issue 241 (Friday, December 16, 2022)</title>
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[Federal Register Volume 87, Number 241 (Friday, December 16, 2022)]
[Notices]
[Pages 77112-77119]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-27351]
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FEDERAL DEPOSIT INSURANCE CORPORATION
RIN 3064-ZA20
Guidelines for Appeals of Material Supervisory Determinations
AGENCY: Federal Deposit Insurance Corporation.
[[Page 77113]]
ACTION: Notice of guidelines.
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SUMMARY: On December 13, 2022, the Federal Deposit Insurance
Corporation adopted revised Guidelines for Appeals of Material
Supervisory Determinations (Guidelines). The revisions expand and
clarify the role of the agency's Ombudsman, adding the Ombudsman to the
Supervision Appeals Review Committee as a non-voting member, and
require that materials considered by the Supervision Appeals Review
Committee be shared with both parties to the appeal on a timely basis,
subject to applicable legal limitations on disclosure. In addition, the
revised Guidelines allow insured depository institutions to request a
stay of a material supervisory determination while an appeal is
pending.
DATES: The revised Guidelines become applicable December 13, 2022.
FOR FURTHER INFORMATION CONTACT: Sheikha Kapoor, Senior Counsel, Legal
Division, 202-898-3960, <a href="/cdn-cgi/l/email-protection#86f5ede7f6e9e9f4c6e0e2efe5a8e1e9f0"><span class="__cf_email__" data-cfemail="f3809892839c9c81b395979a90dd949c85">[email protected]</span></a>; James Watts, Counsel, Legal
Division, 202-898-6678, <a href="/cdn-cgi/l/email-protection#19736e786d6d6a597f7d707a377e766f"><span class="__cf_email__" data-cfemail="442e33253030370422202d276a232b32">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. 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 statute
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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In 1995, the FDIC adopted Guidelines for Appeals of Material
Supervisory Determinations to implement section 309(a). At that time,
the FDIC's Board of Directors established the SARC to consider and
decide appeals of material supervisory determinations.\4\ The Board has
modified the composition of the SARC over the years, but as of 2021,
the SARC included: one inside member of the FDIC's Board of Directors
(serving as Chairperson); one deputy or special assistant to each of
the other inside Board members; and the General Counsel as a non-voting
member.
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\4\ 60 FR 15923 (Mar. 28, 1995).
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In January 2021, the FDIC adopted Guidelines that replaced the SARC
as the final level of review in the appellate process with a standalone
office within the FDIC, designated the Office of Supervisory Appeals
(Office).\5\ After appealing a material supervisory determination to
the relevant Division Director, an IDI would have had the option to
appeal to the Office. If a material supervisory determination was
appealed to the Office, a three- or five-member panel of reviewing
officials would consider the appeal and issue a written decision to the
IDI. The Guidelines did not provide for additional review beyond the
Office.
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\5\ 86 FR 6880 (Jan. 25, 2021).
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Earlier this year, the FDIC revised the Guidelines by restoring the
SARC as the final level of review of material supervisory
determinations made by the FDIC.\6\ The revised Guidelines
reconstituted the SARC as it existed in 2021. 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 FDIC also eliminated a provision that had been added
specifically to accommodate an independent Office of Supervisory
Appeals, which required communications between the Office and either
supervisory staff or the appealing IDI, including materials submitted
to the Office for review, to be shared with the other party to the
appeal.
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\6\ 87 FR 30942 (May 20, 2022).
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The FDIC invited comments on all aspects of the revised Guidelines,
including, in particular, how the process could be further enhanced to
include the Ombudsman's perspective. Commenters generally disagreed
with the restoration of the SARC structure, but supported expanding the
Ombudsman's role in the appeals process. In addition, commenters
recommended changes to other aspects of the appeals process, including
the sharing of information with an appealing institution, the standard
of review, and staying supervisory actions while an appeal is pending.
II. October 2022 Proposal To Amend the Guidelines
In October 2022, the FDIC proposed further amendments to the
Guidelines to incorporate certain suggestions made by commenters and
address concerns raised by the commenters. Recognizing the need for a
balance of perspectives to be reflected in the appellate process, the
FDIC proposed to add the Ombudsman to the SARC as a non-voting member.
Adding the Ombudsman to the SARC as a non-voting member would minimize
any potential for conflict with the Ombudsman's statutory role as a
liaison between the agency and any affected person. As a non-voting
member, the Ombudsman would be expected to attend SARC meetings,
participate in discussions, and offer views, opinions, and advice to
the SARC during its deliberations based on the Ombudsman's perspective
as a neutral advocated for a fair process, and as a party independent
of the supervisory process. Under the proposed Guidelines, the
Ombudsman would also have access to all materials reviewed by the SARC.
The FDIC also recognized that adding the Ombudsman to the SARC
could cause IDIs to reconsider whether they should share confidential
information with the Ombudsman, given that the Ombudsman could be
involved in deciding a potentially related supervisory appeal. The FDIC
proposed to address this by allowing a SARC member to designate any
member of his or her staff within the member's area of responsibility
to serve on the SARC on his or her behalf. For example, if the
Ombudsman were unable to serve as a SARC member with respect to a
particular appeal because of information learned from meeting with the
institution, he or she might designate a Regional Ombudsman who has not
been involved in the matter to serve on the SARC instead.
To address concerns expressed by commenters about possible
retaliatory actions if an IDI submits a supervisory appeal, the
proposal required the Ombudsman to monitor the supervisory process
following an IDI's submission of an appeal, and noted that the
Ombudsman will be expected to report to the Board on these matters
periodically.
The FDIC also sought to address commenters' concerns regarding the
elimination of a provision that generally required communications
between the Office and supervisory staff to be shared with the
appealing institution. The FDIC agreed that basic notions of fairness
support a requirement that both parties to the appeal are aware of the
information considered by the decision-maker. The proposal required
that all materials considered by the SARC be shared with both parties
to the appeal, subject to applicable legal limitations on
[[Page 77114]]
disclosure.\7\ The Ombudsman would oversee this aspect of the process,
verifying that both parties have received all materials considered by
the SARC.
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\7\ 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.
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Related to the proposed addition of the Ombudsman as a non-voting
member of the SARC, the FDIC proposed to make certain conforming
changes to other provisions of the Guidelines in section G.4 and prior
section J. The FDIC also proposed to amend section G.1 of the
Guidelines to require copies of all relevant materials related to an
appeal to be provided to the Office of the Ombudsman.
The FDIC further proposed to amend the Guidelines to expressly
permit IDIs to request a stay of an action or determination from the
appropriate Division Director while its appeal is pending. The request
would be in writing and include the reasons for the stay. The Division
Director would have discretion to grant a stay, and would generally
decide whether a stay is granted within 21 days of receiving the IDI's
request. The Division Director could grant a stay subject to certain
conditions where appropriate; for example, a stay could be time-
limited.
III. Discussion of Comments
The FDIC received three comment letters in response to the proposed
Guidelines: (1) a joint letter from six banking industry trade
associations; (2) a letter from a bank holding company; and (3) a
letter from a nonprofit think tank. While commenters were appreciative
of some of the FDIC's proposed changes, they all had further
suggestions.
SARC Membership
Commenters were generally supportive of including the Ombudsman as
a member of the SARC. While commenters viewed this change as an
improvement, one commenter questioned why the Ombudsman would be made a
non-voting member, rather than a voting member, of the SARC.
A commenter suggested that the Guidelines specify the criteria for
minimum qualifications to serve as a voting member of the SARC when an
individual is designated by an FDIC Director, stating that this would
promote greater credibility and trust in the process. The commenter
also recommended that the FDIC develop and maintain a list of qualified
candidates outside the FDIC to serve on the SARC, including current
state supervisors (from states and regions outside of where the appeal
originated) and retired examiners, and allow FDIC Directors to appoint
individuals from this list to serve on the SARC.
Stay of a Supervisory Decision or Action
Commenters generally appreciated the proposal to allow institutions
to request a stay of a material supervisory determination while an
appeal is pending. However, one commenter suggested requiring the SARC,
rather than the appropriate Division Director, to decide requests for
stays. The commenter recommended that the FDIC set specific standards
for evaluating stay requests, and making public the basis for denial of
any stay request (subject to the protection of confidential
information). Another commenter suggested that a stay should be
automatic unless the relevant Division Director can make a showing in
writing that a stay would pose a threat to the safety and soundness of
the bank or otherwise adversely impact the banking system.
Appeal Directly to SARC and SARC Standard of Review
One commenter suggested giving institutions the option to bypass
the Division Director level review and appeal directly to the SARC.
This commenter also suggested requiring the SARC to conduct a de novo
review and prohibiting the SARC from relying on the opinions and
conclusions of the Division Directors, including their findings of
facts.
Sharing of Information
One commenter suggested that the FDIC prohibit ex parte
communications (including oral communications) and require any ex parte
communications that inadvertently occur to be memorialized in writing
and made available to both the SARC and the appealing bank on a timely
basis.
Additionally, the commenter suggested that the FDIC clarify that
both parties will receive the information considered by the SARC on a
timely basis prior to the issuance of the SARC's decision, so that both
parties will have an opportunity to correct the factual record prior to
a SARC decision.
Burden of Proof
A commenter stated that the burden of proof in appeals proceedings
should not be on the institution, noting that this is not required by
statute, and the appellate process is not governed by the
Administrative Procedure Act or other formal judicial review
procedures. The commenter stated that this reinforces a structure under
which an appeal cannot succeed unless the decision maker rules that the
people they supervise are not merely wrong, but clearly wrong.
Inspector General Review
One commenter recommended that the FDIC instruct the FDIC's Office
of the Inspector General (OIG) conduct periodic reviews of the
appellate process as well as the decisions or outcomes of appeals, and
publish these findings on the FDIC's website. The commenter stated that
the FDIC Board should annually review and approve the OIG's findings
and make them public.
IV. Final Guidelines
The FDIC is amending the Guidelines generally as proposed, with
additional changes intended to address certain areas raised by the
commenters. As discussed further below, the revised Guidelines would
include the following changes: (1) adding the Ombudsman as a non-voting
member of the SARC, (2) requiring all materials considered by the SARC
to be shared with both parties to the appeal on a timely basis, subject
to applicable legal limitations on disclosure, and (3) requiring the
Division Director, when deciding whether to issue a stay with respect
to a material supervisory determination, to provide the institution
with the reason(s) for his or her decision in writing.
Ombudsman's Role
The revised Guidelines include the Ombudsman as a non-voting member
of the SARC. The FDIC believes that this provides for a balance of
perspectives while minimizing potential for conflict with the
Ombudsman's statutory role that may result if the Ombudsman were a
voting member. The FDIC's Ombudsman has a longstanding commitment to
neutrality that could be compromised if the Ombudsman were to serve as
a voting member of the SARC. If the Ombudsman were a voting member, he
or she might decide a matter against the institution, and this
possibility could affect IDIs' willingness to utilize the Ombudsman's
services. As a non-voting member, the Ombudsman will attend SARC
meetings, participate in discussions, and offer views, opinions, and
advice to the SARC during its deliberations based on the Ombudsman's
perspective as a neutral advocate for a fair process, and as a party
independent of the supervisory process. As a SARC member, the Ombudsman
will have access to all materials reviewed by the SARC.
[[Page 77115]]
Consistent with these changes, the Guidelines include conforming
amendments in sections G.4 and J.\8\
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\8\ Specifically, G.4 is amended to eliminate the reference to
the Ombudsman submitting views in writing to the SARC. As explained
in the proposal, a separate mechanism for providing views to the
SARC is not necessary because the Ombudsman will now be a SARC
member. Section J of the Guidelines states that the subject matter
of a material supervisory determination is not eligible for
consideration by the Ombudsman, and is also being eliminated to
accommodate the Ombudsman's membership on the SARC.
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In addition, the FDIC is adopting the proposed provision of the
Guidelines that would require the Ombudsman to monitor the supervisory
process following an IDI's submission of an appeal. This should help to
alleviate concerns regarding potential retaliation. The Ombudsman will
be expected to report to the Board on these matters periodically.
Consistent with the proposal, the revised Guidelines allow a SARC
member to designate any member of his or her staff within the member's
area of responsibility to serve on the SARC on his or her behalf. For
example, if the Ombudsman is unable to serve as a SARC member with
respect to a particular appeal because of information learned from
meeting with the institution, he or she might designate a Regional
Ombudsman who has not been involved in the matter to serve on the SARC
instead.
The Ombudsman also oversees the sharing of information considered
by the SARC in connection with the appeal, as described in further
detail below.
Sharing of Information
As noted above, a commenter appreciated the proposed provision that
would require information considered by the SARC to be shared with both
parties to the appeal, subject to applicable legal limitations on
disclosure. However, the commenter suggested that the FDIC clarify the
timing of when parties will receive this information. The FDIC agrees
that such clarification would be useful. The revised Guidelines state
that information considered by the SARC (subject to applicable legal
limitations on disclosure) will be shared on a timely basis. This
information will be provided in time for the appealing institution to
prepare for a meeting with the SARC, if oral presentation is requested.
The Ombudsman will oversee this aspect of the process, verifying that
both parties have received all materials considered by the SARC.
Stay of Material Supervisory Determinations
As discussed above, commenters raised concerns relating to the
proposed provision of the Guidelines that would allow institutions to
request a stay of a supervisory determination while an appeal is
pending, requesting that the SARC decide requests for stays. The
revised Guidelines provide that requests for a stay should be directed
to and decided by the Division Director. In order to preserve the
SARC's independent judgment based on the complete record of the appeal
as provided by the appealing bank and the responsible supervisory
staff, decision-making authority regarding a request for a stay will
remain with the appropriate Division Director. The FDIC also
appreciates the recommendation that any decision with respect to a stay
include the reason(s) for the decision in writing, and is including
this in the revised Guidelines. This is consistent with current
practice. In terms of standards for evaluating a request for a stay,
the FDIC expects that the decision may be based on a number of factors,
including the likelihood of irreparable and/or material harm. The
resolution of procedural requests, including a request for a stay, will
typically be set forth in the SARC's decision with respect to an
appeal, which will be published as provided by the Guidelines.
The FDIC further notes that if an institution is concerned about
the impact of a supervisory determination, section G of the Guidelines
also provides for expedited review by the SARC under appropriate
circumstances. In some circumstances, this course of action may be more
appropriate than requesting a stay of a supervisory decision or action.
V. Responses to Other Comments
SARC Membership
A commenter suggested that the Guidelines specify the criteria for
minimum qualifications to serve as a voting member of the SARC when an
individual is designated by an FDIC Director, stating that this would
promote greater credibility and trust in the process. SARC members that
have been designated by Directors are special assistants or deputies to
that Director and have a broad view of FDIC policy due to their
positions. They are agency officials independent from the staff that
carry out day-to-day supervisory responsibilities, but have substantial
exposure to the supervisory process, providing a strong foundation for
reviewing material supervisory determinations.
Appeal Directly to SARC
A commenter suggested giving institutions the option to bypass the
Division Director level review and appeal directly to the SARC. The
FDIC has previously noted, however, that its experience in
administering the appellate process suggests that Division-level review
resolves issues, narrowing the matters in dispute prior to SARC review
or eliminating the need for an appeal to the SARC.\9\ Division-level
review also ensures that arguments are more fully developed for the
SARC's review, and allows the Division Director to correct errors and
maintain consistency across the organization. The Division Director
also has the authority to refer an appeal directly to the SARC under
the current Guidelines.
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\9\ See 82 FR 34522, 34525 (July 25, 2017).
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Structure of Appeals Process
As noted above, the commenters did not support the approach
reflected in the proposed Guidelines, with two commenters recommending
that the either FDIC reinstate the Office of Supervisory Appeals or
develop and maintain a list of qualified candidates outside the FDIC to
serve on the SARC. The Riegle Act requires appeals to be decided by
agency officials, as it defines ``independent appellate process'' as
``review by an agency official who does not directly or indirectly
report to the agency official who made the material supervisory
determination under review.'' \10\ Review of material supervisory
determinations by a Board-level committee such as the SARC also
promotes accountability in the supervisory appeals process. Ultimate
responsibility for the FDIC's supervision function is vested in the
agency's Board of Directors by statute, and the SARC structure ensures
that the Board remains accountable for the agency's supervisory
determinations. Hiring individuals from outside the agency to make
final supervisory decisions was a significant departure from the FDIC's
established approach for more than 25 years of reliance on a Board-
level committee and could undermine accountability for supervisory
determinations. Moreover, this approach differed significantly from how
the other agencies subject to the Riegle Act carry out their
responsibilities under the Act. While there is some diversity of
approach, the Federal Reserve Board of Governors, the Office of the
Comptroller of the Currency, and the National Credit Union
Administration utilize full-time,
[[Page 77116]]
internal staff or Board members in their appeals processes.
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\10\ 12 U.S.C. 4806(f)(2).
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While reinstatement of the SARC was not the subject of the
proposal, one commenter asserted that the rescission of the Office of
Supervisory Appeals without notice and comment was inconsistent with
the Administrative Procedure Act (APA) and that the proposed Guidelines
do not meaningfully address concerns about the appeals process. Taking
action to restore the SARC structure quickly avoided a situation in
which an appeal might be filed while the Guidelines and the appropriate
appeals structure were under review. The FDIC also notes that while
notice and comment was not required, the FDIC requested comment, and
subsequently further solicited comment on additional changes.
SARC Standard of Review
A commenter suggested requiring the SARC to conduct a de novo
review and prohibiting the SARC from relying on the opinions and
conclusions of the Division Directors, including their findings of
facts. The SARC reviews an 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 FDIC believes
this standard of review is appropriate at the final level of review,
and is retaining it in the revised Guidelines. The FDIC also notes that
use of a de novo standard at the final level of review would be
inconsistent with the appeals processes used at other banking agencies,
such as the Board of Governors of the Federal Reserve System. However,
the Division Director considers whether material supervisory
determinations are consistent with applicable laws, regulations, and
policy, and makes his or her own supervisory determination without
deferring to the judgments of either party. The FDIC has previously
noted that this approach may reasonably be characterized or described
as a de novo standard of review, while in fact providing more
specificity on the actual considerations to be applied.
Burden of Proof
Section G.3 of the current Guidelines provides that the burden of
proof as to all matters at issue in the appeal rests with the
institution. A commenter raised concern with this provision, stating
that an appeal cannot succeed unless the decision maker finds that a
determination is not merely wrong, but clearly wrong. This conflates
the burden of proof with the standard of review. The burden of proof
only provides that the institution must come forward with evidence or
arguments in order to make its case. The standard of review provides
the level of proof demanded to satisfy that burden. The Guidelines do
not require the institution to demonstrate that the determination is
clearly wrong. Rather, the SARC reviews whether a material supervisory
determination is consistent with the established policies, practices,
and mission of the FDIC, as well as the overall reasonableness of, and
the support offered for, the positions advanced.
Inspector General Review
As noted above, a commenter recommended that the FDIC instruct the
FDIC's Office of the Inspector General to conduct periodic reviews of
the appellate process, and recommended that the FDIC's Board annually
review and approve the OIG's findings and make them public. The FDIC
appreciates this suggestion, but notes that the OIG is an independent
office that conducts audits, evaluations, investigations, and other
reviews of FDIC programs and operations. The FDIC generally does not
instruct the OIG to initiate particular reviews. With respect to review
of OIG findings, the FDIC's Audit Committee reviews all reports from
the OIG relating to FDIC's operations. However, the FDIC is not in a
position to approve the findings of the OIG, which is an independent
office.
For the reasons set out in the preamble, the Federal Deposit
Insurance Corporation adopts Guidelines for Appeals of Material
Supervisory Determinations as set forth below.
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 Supervision Appeals Review Committee (SARC).
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 FDIC supervises (i.e., insured State nonmember banks, insured
branches of foreign banks, and state savings associations), and to
other insured depository institutions for 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 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;
[[Page 77117]]
(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 the most recent submission
of information from the institution, whichever is later, 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
SARC Chairperson, 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 SARC under these Guidelines.
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
[[Page 77118]]
containing a material supervisory determination or other written
communication of a material supervisory determination. Requests for
review also may be submitted electronically. To ensure confidentiality,
requests should be submitted through <a href="http://securemail.fdic.gov">securemail.fdic.gov</a>, directing the
message to <a href="/cdn-cgi/l/email-protection#dd99b4afb8bea9b2af8fb8abb4b8aa8fb8aca8b8aea99dbbb9b4bef3bab2ab"><span class="__cf_email__" data-cfemail="b4f0ddc6d1d7c0dbc6e6d1c2ddd1c3e6d1c5c1d1c7c0f4d2d0ddd79ad3dbc2">[email protected]</span></a>. 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 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 FDIC within 30 calendar days after the date
of receipt of the Division Director's written determination or if the
written appeal is placed in the U.S. mail within that 30-day period.
The appeal should be sent to the address indicated on the Division
Director's determination being appealed, or sent via email to
<a href="/cdn-cgi/l/email-protection#e1a4b2b2bea0919184808d92a187858882cf868e97"><span class="__cf_email__" data-cfemail="f1b4a2a2aeb0818194909d82b197959892df969e87">[email protected]</span></a>. An acknowledgment of the appeal will be provided
to the institution, and copies of the institution's appeal will be
provided to the Office of the Ombudsman and the appropriate Division
Director. Copies of all relevant materials related to an appeal will be
provided to the Office of the Ombudsman.
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 FDIC
staff, allow an oral presentation. The SARC may hear oral presentations
in person, telephonically, electronically, 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 SARC.
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 FDIC and
the overall reasonableness of, and the support offered for, the
positions advanced. The SARC'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 SARC will
not consider any aspect of an appeal that seeks to change or modify
existing FDIC rules or policy. The SARC, after consultation with the
Legal Division, will refer any appeals that raise policy matters of
first impression to the Chairperson's Office for its consideration. The
SARC will notify the institution, in writing, of its decision
concerning the disputed material
[[Page 77119]]
supervisory determination(s) within 45 days after the date the SARC
meets to consider the appeal, which meeting will be held within 90 days
after either the date of the filing of the appeal or the date that the
Division Director refers the appeal to the SARC.
8. Other Communications
Materials considered by the SARC will be shared with both parties
to the appeal, subject to applicable legal limitations on disclosure,
on a timely basis. 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 FDIC's document
disclosure regulations found in 12 CFR part 309. In cases in which
redaction is deemed insufficient to prevent improper disclosure,
published decisions may be presented in summary form. Published SARC
decisions may be cited as precedent in appeals to the SARC. Annual
reports on the SARC's decisions and 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 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 a stay of a supervisory action or
determination from the Division Director 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, providing the
institution with the reason(s) for his or her decision in writing. A
stay may be granted 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 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 SARC, the SARC
will notify the institution and the State regulatory authority of its
decision. Once the SARC has issued its determination, any other issues
that may remain between the institution and the State regulatory
authority will be left to those parties to resolve.
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 FDIC's authority to take any supervisory or enforcement
action against that institution.
L. 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.
M. 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. In light of this
important principle, the Ombudsman will monitor the supervision process
following an institution's submission of an appeal under these
Guidelines. The Ombudsman will report to the Board on these matters
periodically.
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 December 13, 2022.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2022-27351 Filed 12-15-22; 8:45 am]
BILLING CODE 6714-01-P
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</html>Indexed from Federal Register on December 16, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.