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Notice and Request for Comment on Proposed Amendments to the Guidelines for Appeals of Material Supervisory Determinations

Chairman (Acting) Martin J. Gruenberg
 Statement, Board Meeting   Video
October 18, 2022

The FDIC Board is considering today a Notice and Request for Comment on Proposed Amendments to the Guidelines for Appeals of Material Supervisory Determinations.

The Riegle Community Development and Regulatory Improvement Act of 1994 (Riegle Act) required the FDIC, as well as the other Federal banking agencies, to establish an "independent intra-agency appellate process" for the review of material supervisory determinations.1 The term independent appellate review process "means 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 1995, the FDIC's Board of Directors adopted Guidelines for Appeals of Material Supervisory Determinations (Guidelines) to satisfy this mandate. Under the Guidelines, the FDIC's longstanding practice has been to ensure review of material supervisory determinations by a Board-level committee, known as the Supervision Appeals Review Committee (SARC).

In 2021, the FDIC created an Office of Supervisory Appeals (Office) to replace the SARC in the appellate process.3 The creation of this Office allowed for reliance on individuals with previous supervisory experience recruited from outside the FDIC and hired for intermittent service on a time-limited contract basis to make final supervisory decisions on behalf of the FDIC.

This represented a significant departure from the FDIC's established approach for over 25 years of reliance on a Board-level committee. Hiring individuals on a part-time, term-limited basis to serve in such a role also represented a fundamentally different approach to how the other financial regulators have carried out their responsibilities under the Riegle Act. While there is some diversity of approach among the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the National Credit Union Administration, all of these agencies utilize full-time internal staff or Board members to carry out their appeals processes.

Earlier this year, the FDIC Board voted to restore the SARC structure as the final level of review of material supervisory determinations.4 This action ensures that the FDIC's Board of Directors, which is vested with responsibility for the agency's supervisory functions, remains accountable for material supervisory determinations. In addition, review of material supervisory determinations by a Board-level committee promotes independence from the usual supervisory or examination channels in a manner consistent with the Riegle Act. While the revised Guidelines were effective immediately, the FDIC specifically requested comments on the Guidelines, including the Ombudsman's role in the supervisory appeals process.

The proposal considered by the FDIC Board today would enhance the appeals process by expanding the role of the Ombudsman, as recommended by commenters. It would also address comments concerning the sharing of materials with appealing institutions, and allowing institutions to request a stay of a supervisory determination while an appeal is pending.

Under the proposal, the Ombudsman would be added as a non-voting member of the SARC. The Ombudsman also would be required to monitor the supervisory process following an appeal, which may alleviate some institutions' concerns regarding potential retaliation. Further, the FDIC Division Directors for Risk Management Supervision and Depositor and Consumer Protection would also have discretion to grant a stay of a supervisory determination while an appeal is pending.

Today's Notice includes a further request for comment on these proposed changes. I believe that these are significant enhancements that respond to issues raised by the commenters and look forward to receiving additional comment.

In conclusion, this Notice of Proposed Guidelines is an important step to improving and clarifying the supervisory appeals process.

I would like to thank the FDIC staff for their thoughtful work in bringing this Notice to the Board today. I am pleased to support this Notice.

Last Updated: October 18, 2022