Guidelines for Appeals of Material Supervisory Determinations, 54377-54383 [2020-19276]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION

[Federal Register Volume 85, Number 170 (Tuesday, September 1, 2020)]
[Notices]
[Pages 54377-54383]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19276]


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FEDERAL DEPOSIT INSURANCE CORPORATION

RIN 3064-ZA20]


Guidelines for Appeals of Material Supervisory Determinations

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Notice and request for comment.

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SUMMARY: The Federal Deposit Insurance Corporation proposes to amend 
its Guidelines for Appeals of Material Supervisory Determinations 
(Guidelines) to establish an independent office that would generally 
replace the existing Supervision Appeals Review Committee (SARC) and to 
modify the procedures and timeframes for considering formal 
enforcement-related decisions through the supervisory appeals process.

DATES: Written comments must be received by the FDIC on or before 
October 20, 2020, for consideration.

ADDRESSES: Interested parties are invited to submit written comments, 
identified by RIN 3064-ZA20, by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Agency website: https://www.fdic.gov/regulations/laws/federal/. Follow the instructions for submitting comments.
     Email: [email protected]. Include ``RIN 3064-ZA20'' in the 
subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW, 
Washington, DC 20429.
     Hand Delivery/Courier: Guard station at the rear of the 
550 17th Street building (located on F Street) on business days between 
7:00 a.m. and 5:00 p.m. (EST).
     Public Inspection: All comments received will be posted 
without change to https://www.fdic.gov/regulations/laws/federal, 
including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Samuel B. Lutz, Counsel, Legal 
Division, (202) 898-3773, [email protected]; James Watts, Counsel, Legal 
Division, (202) 898-6678, [email protected].

SUPPLEMENTARY INFORMATION: 
    The Federal Deposit Insurance Corporation (FDIC) is publishing for 
comment proposed amendments to its Guidelines for Appeals of Material 
Supervisory Determinations (Guidelines). The FDIC is seeking comments 
regarding these amendments to the Guidelines in order to provide the 
public an opportunity to provide input and feedback, although notice 
and comment is not required.
    The Guidelines describe the process by which insured depository 
institutions (IDIs) may appeal material supervisory determinations made 
by the FDIC. The current appeals process provides for two stages of 
review. First, an IDI requests review of a material supervisory 
determination by the appropriate Division Director from the Division of 
Risk Management Supervision (RMS), the Division of Depositor and 
Consumer Protection (DCP), or the Division of Complex Institution 
Supervision and Resolution (CISR). If the IDI is not satisfied with the 
Division Director's decision, it may proceed to the second stage of the 
process--an appeal of that decision to the FDIC's Supervision Appeals 
Review Committee (SARC), a standing committee of the FDIC's Board of 
Directors (Board).
    The proposed amendments would replace the SARC with a newly 
established independent office that would exclusively consider 
supervisory appeals. In addition, the proposal would modify the 
procedures and timeframes related to considering formal enforcement-
related decisions through the supervisory appeals process.

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 Riegle 
Act 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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    The Riegle Act defines material supervisory determinations to 
include determinations relating to: (1) Examination ratings; (2) the 
adequacy of loan loss reserve provisions; and (3) classifications on 
loans that are significant to an institution.\4\ Specifically excluded 
from this definition are decisions to appoint a conservator or receiver 
for an IDI or to take prompt corrective action pursuant to Section 38 
of the Federal Deposit Insurance Act (FDI Act), 12 U.S.C. 1831o.\5\ 
Finally, Section 309(g) of the Riegle Act expressly provides that the 
requirement to establish an appeals process shall not affect the 
authority of the Federal banking agencies to take enforcement or 
supervisory actions against an IDI.\6\
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    \4\ 12 U.S.C. 4806(f)(1)(A).
    \5\ 12 U.S.C. 4806(f)(1)(B).
    \6\ 12 U.S.C. 4806(g).
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A. Structure of the Supervisory Appeals Review Committee

    On March 21, 1995, the Board adopted the Guidelines to implement 
Section 309(a). The Board, at that time, established the SARC to 
consider and decide appeals of material supervisory determinations.\7\ 
The SARC was initially comprised of five members: The FDIC's Vice 
Chairperson (as Chairperson of the SARC), the Director of the Division 
of Supervision (DOS) (the predecessor to RMS), the Director of the 
Division of Compliance and Consumer Affairs (DCA) (the predecessor to 
DCP), the FDIC Ombudsman, and the General Counsel.\8\

[[Page 54378]]

Consistent with the Riegle Act's mandate to create an intra-agency 
appeals process, membership in the SARC was limited to FDIC 
officials.\9\ In order to ``establish[] a fair and credible review 
process,'' the SARC was comprised of senior officials at the FDIC, 
including the Directors of DOS and DCA, who were expected to ``bring to 
the Committee the necessary experience and judgment to make well-
informed decisions concerning determinations under review.'' \10\ The 
Guidelines were subsequently amended to add the Director of the 
Division of Insurance as a voting member of the SARC, and to provide 
formally that the Directors of DOS and DCA would not vote on cases 
brought before the SARC involving their respective divisions.\11\
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    \7\ 60 FR 15923 (Mar. 28, 1995).
    \8\ 60 FR 15923, 15930. Committee members could also designate 
another person to serve on their behalf.
    \9\ 60 FR 15923, 15924.
    \10\ 60 FR 15923, 15924.
    \11\ 69 FR 41479, 41480 (July 9, 2004).
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    In July 2004, the FDIC revised the Guidelines to change the 
structure and composition of the SARC to its current form. 
Specifically, the voting members of the SARC are now comprised of: One 
of the FDIC's three inside directors (who serves as the SARC 
Chairperson), and one deputy or special assistant to each of the other 
two inside directors.\12\ The FDIC's General Counsel also serves as a 
non-voting member of the SARC. In the event of a vacancy, the 
Guidelines authorize the FDIC Chairperson to designate alternate 
member(s) to the SARC, so long as the alternate member was not directly 
or indirectly involved in making or affirming the material supervisory 
determination under review. These changes were intended to avoid the 
potential conflicts then faced by the Ombudsman and Division 
Directors,\13\ and to ``further underscore the perception of the SARC 
as a fair and independent high-level body for review of material 
supervisory determinations within the FDIC.'' \14\
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    \12\ 69 FR 41479, 41480.
    \13\ 69 FR 41479, 41480-81. For example, the Ombudsman was 
excluded from the SARC in order to avoid any possible conflict 
between the Ombudsman's statutory role as a liaison between the 
agency and financial institutions on the one hand, and as a decision 
maker on the SARC on the other hand.
    \14\ 69 FR 41479, 41480.
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B. 2019 Listening Sessions on Supervisory Appeals and Dispute 
Resolution Process

    In 2019, the FDIC decided to explore potential improvements to the 
supervisory appeals process. As part of this process, the FDIC's Office 
of the Ombudsman hosted a Webinar and in-person listening sessions in 
each FDIC Region regarding the agency's supervisory appeals and dispute 
resolution processes. The sessions offered bankers and other interested 
parties an opportunity to provide individual input and recommendations 
regarding the supervisory appeals process.\15\ Participants were 
encouraged to comment on various topics, including perceived barriers 
to, or concerns about, resolving disagreements, timeframes and 
procedures for pursuing reviews and appeals, and information publicly 
available on appeals and examination disagreements.
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    \15\ See FIL-52-2019 (Sep. 24, 2019), https://www.fdic.gov/news/financial-institution-letters/2019/fil19052.pdf.
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    Among other topics, session participants offered suggestions on the 
composition of the SARC. In particular, participants focused on the 
composition of the Committee and opportunities to further enhance the 
independence of the appeals process. Relatedly, participants emphasized 
the importance of ensuring that SARC members have the subject matter 
expertise needed to decide supervisory appeals. Participants offered a 
range of suggestions on this topic, including adding an individual who 
is not otherwise affiliated with the FDIC to the Committee, such as a 
retired banking attorney or a former Federal or State bank regulator. 
Certain challenges were also discussed with respect to adding an 
individual who is not affiliated with the FDIC, such as ensuring the 
confidentiality of information and the avoidance of conflicts of 
interest.
    Questions related to the timeframes for appeals and the types of 
matters that may be appealed if the FDIC pursues a formal enforcement 
action were also raised at a number of the listening sessions. Through 
these discussions, it appears that the procedures that apply when the 
FDIC has provided notice of a written or proposed enforcement action 
may be a source of confusion to bankers.
    Participants also raised concerns about bankers' fear of 
retaliation by FDIC examiners, notwithstanding existing provisions in 
the Guidelines prohibiting such retaliation. This concern was cited as 
a basis for causing bankers to be reluctant to fully engage with the 
FDIC on material areas of disagreement. FDIC policy currently prohibits 
any retaliation, abuse, or retribution by an agency examiner or any 
FDIC personnel against an institution, and the FDIC continues to 
explore options to reaffirm its commitment to and ensure compliance 
with this policy. In addition, while not specifically related to the 
supervisory appeals process, participants provided a variety of 
comments and recommendations on the examination process. Participants 
also shared views regarding the publicly available information on SARC 
decisions and ideas for improving the transparency of SARC decisions, 
such as publishing aggregate data on the outcomes of supervisory 
appeals.

Amendments to the Guidelines

    The FDIC's experience with the SARC, along with feedback obtained 
through the listening sessions, suggests that there may be 
opportunities to improve the FDIC's supervisory appeals process, 
particularly with respect to enhancing the independence of the SARC and 
the procedures and timeframes that apply to determinations in the 
context of formal enforcement-related decisions. Accordingly, through 
this Notice, the FDIC is seeking comment on amendments to the 
supervisory appeals process that would establish an independent office 
within the FDIC that would have as its only function the review and 
consideration of supervisory appeals. The FDIC is also proposing 
amendments to improve its procedures and timeline for the consideration 
of certain decisions related to formal enforcement actions through the 
supervisory appeals process.

Proposed Office of Supervisory Appeals

    The FDIC proposes to replace the SARC with an independent, 
standalone office within the FDIC, which would be known as the Office 
of Supervisory Appeals (Office). The Office would report directly to 
the FDIC Chairperson's Office and would have delegated authority to 
independently consider and resolve intra-agency supervisory appeals. 
The Office would be fully independent of those FDIC Divisions with 
authority to issue material supervisory determinations (RMS, DCP, and 
CISR), while still operating within the FDIC.
1. Staffing of the Office
    The FDIC proposes that the members of the Office responsible for 
deciding appeals have bank supervisory or examination experience (for 
example, such individuals may be retired bank examiners). Such 
reviewing officials would be employees of the FDIC and may serve on 
staggered terms. To promote the independence of the Office, the FDIC 
anticipates recruiting externally and employing reviewing officials on 
a part-time or intermittent, time-limited basis. It is possible that 
particular individuals would be selected from a pool of reviewing 
officials for an

[[Page 54379]]

appeal on a case-by-case basis. Members of the Office, as employees of 
the FDIC, would be cleared for potential conflicts of interest and 
would be subject to the FDIC's normal requirements for confidentiality. 
In creating this Office, the FDIC is not intending to create 
unnecessary layers of decision-making. The Office, as envisioned, would 
be devoted to executing the FDIC's supervisory appeals functions, which 
responsibilities would include considering and reviewing appeals and 
issuing decisions.
2. Appeals Process
    IDIs would continue to be encouraged to make good-faith efforts to 
resolve disagreements with examiners and/or the appropriate Regional 
Office. If these efforts are not successful, IDIs would submit a 
request for review with the appropriate Division Director. Upon 
receiving a request for review, the Division Director would have the 
option of issuing a written decision or sending the appeal directly to 
the Office. For example, if an IDI appealed a second material 
supervisory determination based on similar facts and circumstances 
while its initial appeal is pending before the Office, the FDIC expects 
that the Division Director would refer the subsequent appeal to the 
Office. IDIs that disagree with a decision made by the Division 
Director could submit an appeal to the Office.
    A three-member panel of the Office would consider appeals and would 
issue a written decision. The IDI and the Division Director would 
continue to be permitted to submit views on the appeal to the Office 
during this stage of Office's review process, and the Ombudsman also 
would be authorized to submit views to the review panel. The Legal 
Division would provide counsel to the Office.
    Oral presentation would be permitted if a request is made by the 
institution or by FDIC staff. Under the existing Guidelines, the SARC 
has discretion whether or not to allow oral presentation, but requests 
for oral presentations are generally granted.
    The reviewing panel would be an appellate body that would make 
independent supervisory determinations. The panel would review appeals 
for consistency with the policies, practices, and mission of the FDIC 
and the overall reasonableness of, and the support offered for, the 
positions advanced, consistent with the existing standard of review for 
the SARC. The scope of the panel's review would 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 would be given to any facts or circumstances that occur 
or corrective action taken after the determination was made. The 
Office's role would not be to set policy, which is the province of the 
Board and its designees. For that reason, the Office would not consider 
aspects of an appeal that seek to change or modify FDIC policy or 
rules. As part of its role in providing counsel to the Office, the 
Legal Division would also advise on existing FDIC policies and rules, 
and help ensure no decisions made by the Office changed or modified 
FDIC policies or rules. Additionally, if an institution has multiple 
appeals pending based upon similar facts and circumstances, those 
appeals could be consolidated for expediency.
    Consistent with the existing Guidelines and the Riegle Act, 
decisions to appoint a conservator or receiver for an insured 
depository institution would not be considered material supervisory 
determinations. Under this proposal, the Guidelines would further 
clarify that decisions made in furtherance of the resolution or 
receivership process or planning (such as decisions made pursuant to 
parts 370, 371, and 381, and Sec.  360.10 of the FDIC's rules and 
regulations) also would not be considered material supervisory 
determinations. Unlike the ``material supervisory determinations'' 
enumerated in the statute and the current Guidelines,\16\ decisions 
made under the regulatory provisions identified above are not focused 
on monitoring for and addressing issues that may affect an 
institution's condition. Instead, these decisions involve actions 
related to assessing or promoting the resolvability of certain 
institutions, such as those facilitating the prompt payment of deposit 
insurance to a large number of depositors or the orderly resolution of 
an institution with a portfolio of qualified financial contracts.
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    \16\ The Riegle Act defined ``material supervisory 
determinations'' to include determinations relating to examination 
ratings, the adequacy of loan loss reserve provisions, and loan 
classifications on loans that are significant to an institution. 12 
U.S.C. 4806(f)(1)(A). Section D of the current Guidelines defines 
``material supervisory determinations'' more broadly to include 
seventeen different types of supervisory determinations.
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    The FDIC anticipates that these combined changes could provide 
several advantages over the existing supervisory appeals process and 
would address several of the recommendations presented during the 
Webinar and in-person listening sessions. In particular, the FDIC 
anticipates that:
     By creating a standalone office within the FDIC with 
authority to consider and resolve supervisory appeals, and by staffing 
that office with professionals serving term or other non-permanent 
appointments, the supervisory appeals process could operate more 
independently, and without perceived conflicts of interest, in the 
FDIC's organizational structure;
     Establishing the Office within the FDIC would continue to 
protect supervisory and confidential information, and avoid actual and 
perceived conflicts of interest, while still satisfying the FDIC's 
statutory requirement to have an intra-agency appeals process;
     Staffing the Office with professionals who have bank 
supervisory or examination experience would ensure that individuals 
deciding on appeals have relevant knowledge and expertise, and would 
facilitate a robust and responsive supervisory appeals process that 
will be consistent over time; and
     The proposed structure would be scalable in terms of 
staffing, so the Office may be in a position to adapt more quickly to 
cyclical workload variations, allowing the FDIC to handle varying 
numbers of appeals in shorter periods of time.
    The FDIC anticipates that staffing and otherwise establishing the 
Office would require a period of time following the adoption of any 
revised Guidelines. During this time, supervisory appeals would 
continue to be heard by the SARC pursuant to the existing Guidelines.

Procedures and Timeframes for Formal Enforcement-Related Decisions

    The FDIC also proposes to amend its procedures for considering 
formal enforcement-related decisions through the supervisory appeals 
process. Generally, the FDIC identifies the facts and circumstances 
that may give rise to a formal enforcement action during the 
examination process, and these facts and circumstances are described in 
a Report of Examination (ROE) that is transmitted to the IDI at the 
conclusion of the examination.
    In July 2017, the FDIC revised its Guidelines to provide an 
opportunity for IDIs to appeal certain material supervisory 
determinations underlying formal enforcement actions through the 
supervisory appeals process.\17\ Specifically, the revised Guidelines 
provide that if the FDIC does not commence a formal enforcement action 
within 120 days after giving written

[[Page 54380]]

notice to an IDI of a recommended or proposed formal enforcement 
action, the IDI may appeal the facts and circumstances underlying the 
formal enforcement action to the SARC, unless the SARC Chairperson 
agrees to extend the 120-day period.\18\
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    \17\ 82 FR 34522, 34524 (July 25, 2017).
    \18\ 82 FR 34522, 34526.
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    While the 2017 amendments to the Guidelines may have been helpful 
in addressing some of the issues the FDIC encountered in administering 
the supervisory appeals process, further changes to the process may be 
beneficial. Consistent with feedback obtained through the 2019 
listening sessions, the FDIC has observed some confusion as to when 
determinations underlying formal enforcement-related actions become 
appealable. In addition, a timeframe longer than 120 days may be 
necessary in order to fully review the facts and circumstances that 
lead to enforcement actions and ensure that such actions are not 
brought prematurely, and to allow sufficient time for an IDI to 
consider and execute a consent order.
    The proposal clarifies that, for purposes of the supervisory 
appeals process, a formal enforcement-related action commences--and 
appeal rights become temporarily unavailable--when the FDIC initiates a 
formal investigation, issues a notice of charges (or notice of 
assessment, as applicable), provides the IDI with a draft consent 
order, or otherwise provides written notice to the IDI that the FDIC is 
reviewing the relevant facts and circumstances to determine whether a 
formal enforcement action is merited. This written notification may be 
provided in the transmittal letter that accompanies the ROE.
    The proposal would further require that if the FDIC provides 
written notice that the FDIC is determining whether a formal 
enforcement action is merited, the FDIC must provide the IDI with a 
draft consent order within 120 days of the date on which notice was 
given. Such a draft consent order could include a standalone cease and 
desist order, an order to pay civil money penalties, or an order for 
restitution. If the FDIC failed to provide the IDI with a draft consent 
order within this 120-day period, the IDI's supervisory appeal rights 
would be made available.
    Once the FDIC provides an IDI with a draft consent order, the 
parties would have an opportunity to negotiate the details of a 
potential settlement. The proposal would not impose a fixed time limit 
on such negotiations. At any time, if the IDI believes that further 
negotiations would not be productive and notifies the Division of this 
decision in writing, the Division would have 90 days from receiving the 
institution's rejection of the consent order to issue a notice of 
charges (or assessment) or to open an order of investigation, or the 
IDI's supervisory appeal rights would be made available. In either 
case, once the IDI's supervisory appeal rights are made available, the 
IDI would have 60 days to file an appeal, consistent with the standard 
timeline following a material supervisory determination. If the IDI 
agrees to the consent order, then the matter would be resolved and the 
need for an appeal would be obviated.
Request for Comment
    Question 1: In contrast to the SARC, the Office would not provide 
representation for Board members in the review process. Should the FDIC 
Chairperson and/or other Board members have an opportunity to review 
decisions before issuance?
    Question 2: The FDIC proposes that the members of the Office have 
bank supervisory or examination experience. Does this constitute the 
appropriate qualifications and experience?
    Question 3: Are there additional steps the FDIC should take to 
promote independence of the Office?
    Question 4: How many reviewing officials should be included on a 
panel? Is three an appropriate number? Are there situations where more 
or less panelists might be appropriate?
    Question 5: Should the appellate process have any additional 
level(s) of review before or after the proposed three-member panel?
    Question 6: Do the proposed timelines properly balance the goals of 
resolving appeals as expeditiously as possible and providing adequate 
time for preparation and review?
    Question 7: Participants at the listening sessions commented on the 
type and extent of publicly available information on SARC decisions. 
What type of information would be helpful to publish about the appeals 
process or specific appeal decisions to promote transparency while 
still maintaining confidentiality?
    Question 8: The FDIC expects the proposed changes to the procedures 
and timeframes applicable to formal enforcement-related decisions to be 
effective for the majority of enforcement actions. How should the FDIC 
handle those unusual cases for which the proposed timeframes are too 
restrictive? Should the parties expect to invoke the provision(s) 
allowing for an extension of the timeframes in these cases?

Proposed Amended 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 Office of Supervisory Appeals (Office).

B. Reviewing Officials

    The Office will be staffed with reviewing officials who have bank 
supervisory or examination experience. Reviewing officials will 
consider and decide appeals submitted to the Office. Each appeal will 
be reviewed and decided by a panel of three reviewing officials who 
have no conflicts of interest with respect to the appeal or the parties 
to the appeal.

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 with respect to 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 Interagency Rating System for Data 
Processing Operations;
    (c) Trust ratings under the Uniform Interagency Trust Rating 
System;
    (d) CRA ratings under the Revised Uniform Interagency Community 
Reinvestment Act Assessment Rating System;

[[Page 54381]]

    (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 adequacy 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 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 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 Chairperson's 
Office, 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 Office under these Guidelines.

[[Page 54382]]

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. 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 has 
considered the merits of the request and has authorized that it be 
filed.
    (2) Within 45 calendar days of receiving a request for review 
described in paragraph (1), the Division Director will:
    (a) 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, 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 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 Office and will provide the mailing address 
for any appeal the institution may wish to file.
    (5) The Division Director may request guidance from the Office or 
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 from the date 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 from the date of 
the Division Director's written determination or if the written appeal 
is placed in the U.S. mail within that 30-day period. If the 30th day 
after the date of the Division Director's written determination is a 
Saturday, Sunday, or a Federal holiday, filing may be made on the next 
business day. The appeal should be sent to the address indicated on the 
Division Director's determination being appealed. Upon receiving the 
appeal, the Office will send an acknowledgment to the institution, and 
will send copies of the institution's appeal to the Office of the 
Ombudsman and the appropriate Division Director.
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. 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 
the Office 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. Submissions From the Ombudsman and the Division Director
    The Ombudsman and the Division Director each 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 Office may hear oral 
presentations in person, telephonically, 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 Office.
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(4), 
above.
7. Scope of Review and Decision
    The Office will be an appellate body and will make independent 
supervisory determinations. The Office 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 Office'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 Office 
will not consider any aspect of an appeal that seeks to change or 
modify existing FDIC rules or policy. The Office, with consultation 
from the Legal Division, will refer any appeals that raise policy 
matters of first impression to the Board for its consideration. The 
Office will notify the institution, in writing, of its decision 
concerning the disputed material supervisory determination(s) within 45 
days from the date the Office meets to consider the appeal, which 
meeting will be held within 90 days from the date of the filing of the 
appeal or from the date that the Division Director refers the appeal to 
the Office.

H. Publication of Decisions

    Decisions of the Office will be published as soon as practicable, 
and the published decisions will be redacted

[[Page 54383]]

to avoid disclosure of the name of the appealing institution and exempt 
information. In cases in which redaction is deemed insufficient to 
prevent improper disclosure, published decisions may be presented in 
summary form. Published Office decisions may be cited as precedent in 
appeals to the Office. Annual reports on 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 will be governed by these Guidelines. The 
Office, with the concurrence of the Legal Division, will retain 
discretion to waive any provision of the Guidelines for good cause. 
Supplemental rules governing the Office's operations may be adopted.

J. Limitation on Agency Ombudsman

    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. 
However, pursuant to Section (G)(4) of these Guidelines, the Ombudsman 
may submit views to the Office for its consideration in connection with 
any pending appeal.

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 
authority will be left to those parties to resolve.

L. 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.

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

    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. 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 August 21, 2020.
James P. Sheesley,
Acting Assistant Executive Secretary.
[FR Doc. 2020-19276 Filed 8-31-20; 8:45 am]
BILLING CODE 6714-01-P