Guidelines for Appeals of Material Supervisory Determinations, 77112-77119 [2022-27351]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION

[Federal Register Volume 87, Number 241 (Friday, December 16, 2022)]
[Notices]
[Pages 77112-77119]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[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, [email protected]; James Watts, Counsel, Legal 
Division, 202-898-6678, [email protected].

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 securemail.fdic.gov, directing the 
message to [email protected]. 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 
[email protected]. 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