OCC Proposes Rule Regarding Appeals of Material Supervisory Determinations

The OCC, in an effort to make the appeals process more independent and decision making more transparent to increase supervised entities’ confidence in the process, recently published a notice of proposed rulemaking proposing multiple changes to the current process under which “supervised entities” may appeal a material supervisory determination.  The OCC stated that the current process had some potential shortcomings, including: (i) few appeals were filed, which the OCC noted could mean that entities felt an appeal could damage their working relationship with the OCC or that the entities felt the process was unfair, or it could mean informal negotiation was resolving most issues; and (ii) because there was no standard of review for appeals, unlike the de novo standard for appeals at the FDIC and the Federal Reserve Board, and most appeals failed, entities might feel that the process was not worth it.

The OCC proposals in the rule include:

• Broadening the applicability to not just include insured depositories and insured credit unions, but to include “an entity for which the OCC makes material supervisory determinations”;
• Create an appeals board through which an appealing entity could file its appeal (or the entity could choose to file the appeal with the applicable Deputy Comptroller, unless the person was substantively involved in the appealed issue);
• The appeals board would review the arguments of the appealing entity and the supervisory office that made the material supervisory determination before making a determination and then publishing a redacted version of the decision;
• Providing more clarity on the factors considered when granting a stay during the appeals process;
• De novo standard of review in the appeals process;
• The current Ombudsman role would change into an impartial liaison between the appealing entity and the person(s) deciding the appeal;
• Expedited procedures when the material supervisory determination relates to or causes critical undercapitalization of an entity; and
• Prohibiting discouraging an entity from filing an appeal and retaliation against an entity for filing an appeal.

The proposed rule includes twenty questions on which the OCC is seeking responses from commenters.  Comments covering the following are specifically mentioned: (i) the composition of the appeals board; (ii) whether the de novo standard of review is the correct standard; and (iii) whether the proposed factors for considering whether to grant a stay are correct.  The comment period ends on April 20, 2026. 

Also related to appealing material supervisory determinations, the FDIC recently issued new guidelines, see WBK’s coverage here.