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) requires 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 are considered and decided.
B. Reviewing Officials
The Office of Supervisory Appeals (Office) is staffed with reviewing officials, hired for fixed terms, who have bank supervisory or examination experience or other relevant experience. Reviewing officials consider and decide appeals submitted to the Office in panels of three reviewing officials selected by the Office who have no conflicts of interest with respect to the appeal or the parties to the appeal. At least one reviewing official on a panel must have bank supervisory or examination experience, and at least one must have industry experience (generally defined as having worked at a bank or for a company that provides services to banks or banking-related services).
In the event a three-member panel cannot be formed, due to one or more vacancies or due to the unavailability of one or more reviewing officials, the FDIC Chairperson may (1) authorize the Office to conduct business temporarily with fewer than three members or (2) appoint one or more officials to serve as reviewing officials on a temporary basis, for a time period not to exceed 120 days. In the latter case, a temporary reviewing official may still participate in the final decision of any appeal in which the appeal is received and a hearing is held before the end of the 120-day period but the final decision is not issued until after the 120-day period ends.
Background information on the Office’s reviewing officials is published on the FDIC’s website. Current government employees with relevant experience may serve on a part-time basis. However, current FDIC employees are not eligible. Current employees of insured depository institutions or their affiliates are also not eligible.
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;
(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, including the severity of a violation, 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 part 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), the Division of Risk Management Supervision (RMS), or the Division of Complex Institution Supervision and Resolution (CISR);
(n) Decisions to initiate informal enforcement actions (such as memoranda of understanding) and determinations regarding an institution’s level of compliance with an informal enforcement action;
(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 or matters requiring attention;
(q) Determinations regarding an institution’s compliance with conditions imposed through the supervision or application processes; and
(r) 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 12 CFR parts 370, 371, and 381, and 12 CFR 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, although the determinations upon which such actions are based (such as loan classifications) are appealable, provided they otherwise qualify;
(c) Determinations for which other appeals procedures exist (such as determinations of deposit insurance assessment risk classifications and payment calculations);
(d) Formal enforcement actions and decisions, which for purposes of these Guidelines include a referral to the Attorney General for violations of 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); and
(e) Facts and circumstances underlying pending or proposed formal enforcement actions for which the institution has been provided written notice that the action is based on: (1) unsafe or unsound practices for purposes of section 8 of the Federal Deposit Insurance Act; (2) violations of laws or regulations relating to the institution’s anti-money laundering and countering the financing of terrorism (AML/CFT) program or the institution’s sanctions compliance; or (3) violations for which an institution fails to sign an agreement to toll a relevant statute of limitations, if requested to do so by the FDIC. Notice under this paragraph does not suspend or otherwise affect a pending request for review or appeal that was previously submitted.
(3) Additional appeal rights:
(a) In the case of notice of an enforcement action under paragraph (2)(e), 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 FDIC Chairperson, after the FDIC notifies the institution that the relevant Division Director is seeking formal authority to take an enforcement action.
(b) Written notification will be provided to the institution within 10 days of a determination that appeal rights have been made available under this section.
(c) The relevant FDIC Division and the institution may mutually agree to extend the timeframes in paragraph (a) of this section if the parties deem it appropriate.
(4) If the FDIC provides an institution written notice of a proposed formal enforcement action other than an action under paragraph (2)(e), any supervisory appeal involving the facts and circumstances underlying the proposed formal enforcement action will be considered on an expedited basis under a schedule determined by the Office.
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 CISR, or to filing a subsequent appeal with the Office under these Guidelines. An institution may also avail itself of the Ombudsman to attempt to reach an agreeable outcome.
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 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 securemail.fdic.gov, directing the message to DirectorReviewRequest@fdic.gov. 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) of this section, 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 Office 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 Office.
(3) No appeal to the Office is 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 Office and will provide the mailing and email addresses for any appeal the institution may wish to file.
(5) The Division Director may request guidance from the Legal Division as to procedural or other questions relating to any request for review.
G. Appeal to the Office
An institution that does not agree with the written determination rendered by the Division Director may appeal that determination to the Office 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 Office.
1. Filing With the Office
An appeal to the Office 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. 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 Office 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 Office. Evidence not presented for review to the Division Director is generally not permitted; such evidence may be submitted to the Office only if approved by the reviewing panel 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 this appellate 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 Ombudsman and the Division Director may submit views regarding the appeal to the Office within 30 calendar days of the date on which the appeal is received by the Office.
5. Oral Presentation
The Office will, if a request is made by the institution or by FDIC staff, allow an oral presentation. The panel 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 panel.
6. Consolidation, Dismissal, and Rejection
Appeals based upon similar facts and circumstances may be consolidated for expediency. An appeal may be dismissed by the Office 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 Office will decline to consider an appeal if the institution’s right to appeal is not yet available under section D(3), above.
7. Scope of Review and Decision
The panel is an appellate body and makes independent supervisory determinations. The panel reviews the appeal for consistency with the policies (including regulations, guidance, policy statements, examination manuals, and other written publications) of the FDIC and the overall reasonableness of, and the support offered for, the positions advanced. The panel makes its own supervisory determination without deferring to the judgments of either party. The panel’s review is 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 is given to any facts or circumstances that occur or corrective action taken after the determination was made. The panel may not consider any aspect of an appeal that seeks to change or modify existing FDIC rules or policy, and may not overturn a material supervisory determination if the result of such a ruling would be inconsistent with the policies of the FDIC. The panel will notify the institution, in writing, of its decision concerning the disputed material supervisory determination(s) within 45 days after the date the panel 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 Office.
8. Role of the Legal Division
The Legal Division provides counsel to the Office and generally advises the Office on FDIC policies and rules. This function will not include any staff involved in making any supervisory determinations being appealed. If an appeal seeks to change or modify FDIC policies or rules, or raises a policy matter of first impression, the Legal Division will provide notice, along with a written explanation, to the Office, and then, after such notice is provided, refer the matter to the Chairperson’s Office. The Legal Division reviews decisions of the Office for consistency with applicable laws, regulations, and policies of the FDIC prior to their issuance. If the Legal Division determines that a decision is contrary to a law, regulation, or policy of the FDIC, the Legal Division will notify the Chairperson’s Office of the matter, and the Office will revise the decision to conform with relevant laws, regulations, or policies. If an appeal raises procedural questions, including whether issues raised by the institution are eligible for review, the appropriate Division Director or the Office will refer such matters to the Legal Division for resolution, in consultation with the Office. The Legal Division may determine whether an appeal, or an issue raised in an appeal, is ineligible for review. The Legal Division will provide notice, with a written explanation, to the Office and the appealing institution of the resolution of the procedural request or if an appeal, or an issue raised in an appeal, is deemed ineligible for review.
9. Sharing of Appeal Materials
Materials concerning an appeal submitted to the Office by either the relevant Division or an appealing institution, including any communication concerning the substance of appeal between the Office and supervisory staff, will be shared with the other party to the appeal, subject to applicable legal limitations on disclosure, on a timely basis. The Office will provide the reasons for any redactions to the appealing institution. The Ombudsman will verify that both parties have received these materials.
H. Publication of Decisions
Decisions of the Office are published as soon as practicable, and the published decisions are 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. Proposed redactions to decisions of the Office will be shared with the appealing institution prior to publication to allow the institution to raise any potential concern that the redactions are insufficient to avoid its identification. Published SARC or Office decisions may be cited as precedent in appeals to the Office. Annual reports on the Office’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 Office are governed by these Guidelines. The Office, with the concurrence of the Legal Division, retains discretion to waive for good cause deadlines or procedural requirements concerning the administration of appeals under these Guidelines. Supplemental rules governing the Office’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 Office, 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, which should include a weighing of potential harms. A stay may be granted subject to conditions, including time limitations, where appropriate.
J. Limitation on Agency Ombudsman
Except as otherwise provided by these Guidelines, the subject matter of a material supervisory determination for which either an appeal to the Office has been filed, or a final Office decision issued, is not eligible for consideration by the Ombudsman.
K. 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 Office, the Office will notify the institution and the State regulatory authority of its decision. Once the Office 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.
L. Effect on Supervisory or Enforcement Actions
Except as provided in these Guidelines, 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.
M. 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.
N. Prohibition on Examiner Retaliation
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, Virginia 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.