FDIC Issues New Guidelines for Appealing Supervisory Findings

The FDIC issued new guidelines governing how banks can appeal material supervisory determinations within the agency.

The FDIC and other prudential banking regulators are required to establish independent intra-agency appeal processes for the review of material supervisory determinations.  These reviews are to be performed by agency officials who do not report directly or indirectly to the agency official who made the supervisory determination under review and are supposed to include safeguards to protect the appealing institution from retaliation by the examiners whose findings are being reviewed.

Under the FDIC’s new procedures, its existing Supervision Appeals Review Committee is being replaced with an Office of Supervisory Appeals, which will be an independent standalone office within the agency.  The reviews will be heard by three-person panels which will include at least one reviewing official with bank supervisory experience and at least one reviewing official with industry experience (e.g., former bankers and other types of former industry professionals).

During the review, the obligation to timely initiate the appeal and the burden of proof will be on the financial institution seeking the review.  The reviewers will not defer to the judgements of either party, and will not give special weight to the underlying agency official whose decision is under review.  The panels will make their own independent supervisory determinations based on the FDIC’s policies (e.g., regulations, guidance, policy statements, examination manuals, and other written publications) and based on the overall reasonableness and support for the positions advanced by the parties.  The reviewers will not consider aspects of an appeal that seek to change or modify FDIC policies or rules and will not overturn supervisory determinations if the result would be inconsistent with existing FDIC policies.  Institutions will also have greater opportunity to appeal issues even if they are also the subject of proposed or pending enforcement action by the agency.

The FDIC is in the process of forming the Office and hiring reviewers, and will notify institutions once the Office is operational.