The FDIC Board is considering today a final rule that would revise the FDIC’s regulations concerning Section 19 of the Federal Deposit Insurance Act1 to conform with the Fair Hiring in Banking Act (“Act”), which was passed in December 2022.2 The FDIC issued a Notice of Proposed Rulemaking on October 24, 2023.
Section 19 prohibits, without the prior written consent of the FDIC, a person with certain types of criminal offenses on their record from becoming or continuing as an institution-affiliated party; or from directly or indirectly owning, controlling, or participating in the conduct of the affairs of an insured depository institution. Further, the law forbids an insured institution from permitting such a person to engage in any conduct or to continue any relationship prohibited by Section 19.
The Fair Hiring in Banking Act significantly revised Section 19, notably by excluding several categories of previously covered offenses from the scope of Section 19’s prohibitions. The most significant changes include the exclusion of certain older offenses; convictions that have been expunged, sealed or dismissed; lesser offenses such as the use of fake identification, shoplifting, and fare evasion; misdemeanor offenses; and offenses involving the possession of controlled substances. The amendments to the FDIC’s Section 19 regulations are primarily intended to align the regulations with the Act. The amendments also address the FDIC’s procedures for reviewing applications filed under Section 19.
The changes to Section 19 are consistent with the Act’s goal of reducing employment barriers and otherwise providing regulatory relief to individuals and insured depository institutions. In addition, the changes streamline the FDIC’s Section 19 application process and provide additional transparency on the FDIC’s review of these applications.
In developing these amendments, the FDIC considered comments received from the public and consulted and coordinated with the National Credit Union Administration, the Board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency “to promote consistent implementation [of the Act] where appropriate.” Additional details regarding the changes and the FDIC’s implementation of the changes are detailed in the Federal Register Notice.
I strongly support these changes, which would expand employment opportunities in the banking industry, particularly for people of color who are disproportionately affected by the criminal justice system. I would like to thank the FDIC staff for their thoughtful work in bringing this final rule to the Board today.