Winter 2022

FDIC Creates Office of Supervisory Appeals

Related Practices

Attorneys & Professionals

By Jeffery E. Smith
(Published in the Winter 2022 issue of The Bankers' Statement)

As bankers know, challenging agency decisions and actions can be fraught with concern over the potential, whether justified or not, for agency “retribution.” As a result, the Federal Deposit Insurance Corporation (FDIC) has undertaken a comprehensive review of potential alternatives and has sought and received substantial industry input on the issue. That input included conducting industry “listening sessions” in the various FDIC offices, culminating in the issuance of Revised Guidelines for Appeals of Material Supervisory Determinations through an FIL dated January 19, 2021. On December 6, 2021, the FDIC issued a follow-up FIL announcing the formal opening of its Office of Supervisory Appeals (OSA).

The process results from mandates contained in the Riegle Community Development and Regulatory Improvement Act, which included directives to establish a process for review of material supervisory determinations arising in conjunction with FDIC oversight. Establishment of the OSA represents further recognition by the FDIC of the issues pertaining to reluctance of bankers to engage in appeals of material supervisory determinations, which include such things as CAMELS ratings, IT ratings, Trust ratings, CRA ratings, consumer compliance ratings, reserve allocations, loan classifications, alleged violations of law or regulation, Truth in Lendng, enforcement actions such as MOU’s/MRA’s, and a variety of other supervisory findings and actions. A variety of other agency actions are expressly excluded.

Here are few items of note:

Only former and not current government officials will be eligible to serve. Panels of three or five reviewing officials with no conflicts will review and decide the appeals.

Establishment of the OSA provides a new vehicle for bankers and institutions to utilize in good faith for review of important matters where there is a true concern with regard to material agency findings. The stated goal of the FDIC in establishing and staffing the OSA as stated in the December 6 FIL is “… ensuring consistency and accountability in the examination process.” While it will be difficult to overcome natural concerns with regard to the impact of undertaking an OSA appeal, hopefully institutions will in fact do so and take advantage of the new appeals process, when and if they feel that doing so is appropriate and justified, without fear of retribution.