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FDIC Enforcement Decisions and Orders

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   [8025] In the Matter of The Farmers Bank, Windsor, Virginia, Docket No. FDIC-92-292b (12-16-92).

   Board denies request for a private hearing because bank has not demonstrated how its situation is so different from other institutions' as to warrant special treatment. Allegation of innocence and concern that publicity might undermine bank's safety and soundness do not demonstrate that a private hearing would be in the public interest.

   [.1] Practice and Procedure—Hearings—Public or Private
   Private hearings may be granted on the basis of safety and soundness concerns; it is respondent's burden to show that its situation differs so significantly from those involving other banks as to warrant special treatment. Allegation of innocence and concern that publicity might undermine bank's safety and soundness do not demonstrate that a private hearing would be in the public interest.

In the Matter of
THE FARMERS BANK
WINDSOR,VIRGINIA
(Insured State Nonmember Bank)
DECISION AND ORDER OF THE
FEDERAL DEPOSIT INSURANCE
CORPORATION ON REQUEST
FOR PRIVATE HEARING

FDIC-92-292b

BACKGROUND

   On October 2, 1992, the Federal Deposit Insurance Corporation ("FDIC") issued a Notice of Charges and of Hearing ("Notice") seeking the issuance of an Order to Cease and Desist pursuant to section 8(b) of the Federal Deposit Insurance Act ("FDI Act"), as amended, 12 U.S.C. § 1818(b).
The Notice alleges that The Farmers Bank, Windsor, Virginia ("Bank"), engaged in unsafe and unsound banking practices and violated certain laws. Specifically, the Notice charges that the Bank followed hazardous lending and lax collection practices; engaged in practices which produced inadequate operating income and excessive losses; failed to provide and maintain an adequate allowance for loan and lease losses; operated under inadequate loan and investment policies; utilized deficient internal control policies and procedures; and violated Virginia state banking laws, Va. Code §6.1-61 (1990), and FDIC Rules and Regulations, 12 C.F.R. §323.4(a).
   On October 28, 1992, the Bank filed an Answer to the Notice accompanied by a Motion for Private Hearing. FDIC Enforcement {{2-28-93 p.I-83}}Counsel filed their Opposition to Respondent's Motion for Private Hearing on November 5, 1992.

DISCUSSION

[.1] The FDI Act, 12 U.S.C. § 1818(u)(2), provides that:

    All hearings on the record with respect to any notice of charges issued by a Federal banking agency shall be open to the public, unless the agency, in its discretion, determines that holding an open hearing would be contrary to the public interest.
The regulation which implements section 8(u)(2) of the FDI Act is Rule 33(a) of the Uniform Rules of Procedure promulgated by the banking regulatory agencies, 12 C.F.R. § 308.33(a). Rule 33(a) provides that a "respondent may file with the Executive Secretary a request for a private hearing, and any party may file a pleading in reply to such request." Id.
   Based upon the express statutory presumption created in favor of public hearings, the Board of Directors of the FDIC ("Board") has set forth appropriately stringent standards for resolving requests for private hearings. In the Matter of The Citizen's Bank of Clovis, Clovis, New Mexico, FDIC-91-406b, 2 FDIC Enf. Dec. & Ord. (P-H) ¶8012 (March 2, 1992). Private hearings are to be granted under exceptional circumstances and only on the basis of safety and soundness concerns. These concerns cannot be merely speculative, "a bank needs to demonstrate in concerted fashion how the effects of [a particular] proceeding differ so significantly from those involving other banks as to warrant special treatment." Id.
   Reviewed under this standard, the request for a private hearing must be denied. The Bank's request is based on the following assertions. First, the Bank alleges that the publicity generated by a public hearing would promote a "loss of confidence in the soundness" of the Bank which could adversely affect the Bank's profitability and possibly even its extremely strong capital base." Second, the Bank asserts that the Notice has raised only "minor and highly technical violations" which could be misunderstood by the media. The Bank also contends that a public hearing would infringe upon the privacy of individual borrowers.
   Essentially, the Bank argues that "the very significant difference between this case and those involving most other banks involved in similar proceedings is that, as the proceeding starts, Farmers Bank is strongly capitalized, healthy and profitable." Therefore, according to the Bank, "any threat to the bank's safety and soundness posed by adverse publicity is much more significant.... The harm that could be done is far greater than in the ordinary case."
   The Bank has failed to proffer any justification sufficient to overcome the strong presumption in favor of congressionally mandated public hearings. The Bank's claim that its case is exceptional because it is innocent of the charges and in healthy financial condition could be raised by many other banks facing similar charges. Moreover, the fear that adverse publicity would be generated by this hearing, and the further speculation that such publicity could threaten the safety and soundness of the Bank, are not supported by any concrete evidence.
   The Bank's characterization of the charges as merely technical violations is flawed and fails to recognize the gravity of the allegations. Possibility of media confusion over the nature of these charges should not be seriously considered in making these determinations.
   The privacy interests of customers are necessarily implicated in these types of proceedings. However, absent unique privacy concerns, "disclosure of customer financial information is not a ground for a private hearing." In the Matter of the American Bank of the South, 2 FDIC Enf. Dec. & Ord., FDIC-92-17b, ¶8015.1 (1992). Appropriate measures, such as filing confidential documents under seal and redacting personal information, may be taken to protect the privacy interests of borrowers. Clovis at ¶8012.4.
   The concerns expressed by the Bank are common to almost every enforcement hearing and simply do not raise the type of safety and soundness concerns contemplated by the statute and regulations. Accordingly, the allegations furnished by the Bank in support of its request for a private hearing fail to establish that such a hearing is required by the public interest. The motion for a private hearing is denied.
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ORDER

   For the foregoing reasons, it is hereby ORDERED that the request of The Farmers Bank, Windsor, Virginia, for a private hearing is DENIED.
   Dated at Washington, D.C., this 16th day of December, 1992.
   Pursuant to delegated authority, upon the advice and recommendation of the General Counsel.

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