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FDIC Federal Register Citations

[Federal Register: July 9, 2004 (Volume 69, Number 131)]
[Notices]
[Page 41479-41487]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09jy04-79]

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FEDERAL DEPOSIT INSURANCE CORPORATION


Intra-Agency Appeal Process: Guidelines for Appeals of Material
Supervisory Determinations and Guidelines for Appeals of Deposit
Insurance Assessment Determinations

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Notice of guidelines.

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SUMMARY: On June 28, 2004, the Federal Deposit Insurance Corporation
(``FDIC'') Board of Directors (``Board'') adopted revised Guidelines
for Appeals of Material Supervisory Determinations (``guidelines'').
The Guidelines for Appeals of Material Supervisory Determinations
govern the Supervision Appeals Review Committee (``SARC'') process and
supersede the FDIC's prior Guidelines for Appeals of Material
Supervisory Determinations, which were adopted by the FDIC's Board of
Directors on March 21, 1995. The guidelines reconstitute the SARC and
modify the procedures for appeals to the SARC. On that same date, the
Board also adopted Guidelines for Appeals of Deposit Insurance
Assessment Determinations. The Guidelines for Appeals of Deposit
Insurance Assessment Determinations govern the Assessment Appeals
Committee (``AAC'') process. The guidelines reconstitute the AAC and
set out procedures for appeals to the AAC. Both sets of guidelines are
effective upon adoption.

DATES: The SARC Guidelines and the AAC Guidelines became effective on
June 28, 2004.

FOR FURTHER INFORMATION CONCERNING THE SARC GUIDELINES CONTACT: Lisa K.
Roy, Associate Director, Division of Supervision and Consumer
Protection, (202) 898-3764; Christopher Bellotto, Counsel, Legal
Division, (202) 898-3801, Federal Deposit Insurance Corporation, 550
17th St., NW., Washington, DC 20429.

FOR FURTHER INFORMATION CONCERNING THE AAC GUIDELINES CONTACT: William
V. Farrell, Chief, Assessment Management Section, Division of Finance,
(202) 416-7156; Diane Ellis, Associate Director, Division of Insurance
and Research, (202) 898-8978; Lisa K. Roy, Associate Director, Division
of Supervision and Consumer Protection, (202) 898-3764; Christopher
Bellotto, Counsel, (202) 898-3801, Legal Division, Federal Deposit
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION:
The revised Guidelines for Appeals of Material Supervisory
Determinations

[[Page 41480]]

change the composition of the SARC, reducing it from five to three
voting members, and incorporate changes to the procedures governing
SARC appeals. Included are new rules under which the FDIC's Division of
Supervision and Consumer Protection (``DSC'') issues written decisions
if it denies requests for review of material supervisory
determinations; if dissatisfied with the division's determination,
institutions decide for themselves whether to appeal to the SARC; and
SARC decisions will be published, with exempt material redacted. The
types of determinations eligible for review by the SARC and the
standards by which such appeals are decided remain unchanged.
The Guidelines for Appeals of Deposit Insurance Assessment
Determinations change the composition of the AAC, reducing it from
seven to five voting members, and set forth procedures to be followed
by insured depository institutions that choose to appeal adverse
assessment determinations they have received from the appropriate FDIC
division. As with the SARC, AAC decisions will be published, with
exempt material redacted. The types of determinations eligible for
review by the AAC and the standards by which such appeals are decided
remain unchanged.
On March 18, 2004, the FDIC published in the Federal Register, for
a 30-day comment period, a notice of and request for comments the
proposed revisions to the Guidelines for Appeals of Material
Supervisory Determinations and the proposed Guidelines for Appeals of
Deposit Insurance Assessment Determinations. (69 FR 12855). The comment
period closed on April 19, 2004. The FDIC considered it desirable in
this instance to garner comments regarding these guidelines, although
notice and comment rulemaking was not required and need not be employed
should the FDIC make future amendments.
The FDIC received three comment letters, two from trade
organizations (America's Community Bankers and the American Bankers
Association) and one from a depository institution (The Bank of
Easton). The comments generally supported the proposed guidelines,
although a few objections were raised and several recommendations were
made to somewhat revise specific parts of the proposal. The following
is a discussion of the revised guidelines for the SARC and for the AAC
and the comments received.

I. Guidelines for Appeals of Material Supervisory Determinations

Background

Section 309(a) of the Riegle Community Development and Regulatory
Improvement Act of 1994 (Public Law 103-325, 108 Stat. 2160) (``Riegle
Act'') required the FDIC (as well as the other Federal banking agencies
and the National Credit Union Administration Board) to establish an
independent intra-agency appellate process to review material
supervisory determinations.
The Riegle Act 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. In the appeals process, the
FDIC is required to ensure that (1) an appeal of a material supervisory
determination by an insured depository institution is heard and decided
expeditiously; and (2) appropriate safeguards exist for protecting
appellants from retaliation by agency examiners.
On March 21, 1995, the FDIC's Board of Directors adopted the
original Guidelines for Appeals of Material Supervisory Determinations,
which established and set forth procedures governing the SARC, whose
purpose was to consider and decide appeals of material supervisory
determinations as required by the Riegle Act.
A. Membership
As originally constituted, the SARC consisted of the FDIC Vice
Chairperson (as chair of the SARC), the Director of the Division of
Supervision (``DOS''), the Director of the Division of Compliance and
Consumer Affairs (``DCA''), the Ombudsman, and the General Counsel (or
their designees).
The 1995 SARC guidelines were amended in 1999 to add the Director
of the Division of Insurance (now the Director of the Division of
Insurance and Research (``DIR'')) as a voting SARC member, to provide
formally that the Directors of DOS and DCA (now the DSC Director) would
not vote on cases brought before the SARC involving their respective
(now consolidated) divisions, to provide that designees would be
limited to the most senior members of a SARC member's staff, and to
include Truth-in-Lending (Regulation Z) restitution. In addition, the
SARC was expressly authorized to consider appeals of denied filings as
set forth in 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'') (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 DSC.
While the prior guidelines satisfied the Riegle Act's requirement
to establish an independent appellate process for the review of
material supervisory determinations, the revised guidelines will
facilitate the disposition of SARC appeals and further underscore the
perception of the SARC as a fair and independent high-level body for
review of material supervisory determinations within the FDIC.
In the Notice and Request for Comment published on March 18, 2004,
the FDIC proposed to change the composition of the SARC so that the
Director of DSC, the Director of DIR, and the Ombudsman would no longer
serve on the SARC, and new SARC members would be drawn from the most
senior levels of the Corporation.
Under the revised guidelines, SARC membership would consist of
three (3) voting members: (1) One of the inside FDIC Board members,
either the Chairperson, the Vice Chairperson, or the 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 inside FDIC Board member not designated as the SARC
Chairperson.
The General Counsel would be the fourth, and non-voting, member of
the SARC. The FDIC Chairperson can designate alternate member(s) to the
SARC if vacancies occur so long as the alternate member was not
directly or indirectly involved in making or affirming the material
supervisory determination under review. In addition, a member of the
SARC can designate and authorize the most senior member of his or her
staff--within the substantive area--to act on his or her behalf in SARC
matters.
One commenter noted that the designation ``inside directors'' would
make the procedures more ``reader-friendly.'' The FDIC has two
``outside directors''--the Director from the Office of the Comptroller
of the Currency and the Director from the Office of Thrift Supervision.
The FDIC has three ``inside directors''--the FDIC Chairperson, the FDIC
Vice-Chairperson and the appointive FDIC Director. By using the
designation suggested by the commenter, the procedures more clearly
describe the membership of the SARC

[[Page 41481]]

and AAC. The FDIC has adopted this suggestion in the revised
guidelines. In addition, the term ``special assistant'' has been added
to clarify that directors may have both deputies and special assistants
who may serve on the SARC (or AAC).
The three commenters expressed concern over the removal of the
FDIC's Ombudsman from the SARC. One commenter indicated a preference
that the Ombudsman be the sole decision maker for appeals of material
supervisory determinations, but, if not that, at least be retained as a
voting member; one commenter acknowledged the potential for perceived
conflicts that arise because the Ombudsman serves a dual role as SARC
member as well as liaison to insured institutions; the third commenter
saw the Ombudsman as playing a valuable role in facilitating
discussions between institutions and examiners. The latter two
commenters suggested that the Ombudsman be retained as a non-voting
SARC member. The former commenter also objected to the FDIC's proposal
on the grounds that it did not conform with the statutory requirement
for the Ombudsman. No commenter opposed the elimination of division
directors and one expressly supported that change.
After considering the comments on the composition of the SARC, the
FDIC continues to believe that the revised composition and structure of
the SARC satisfies the requirements of the Riegle Act to establish an
independent intra-agency appellate process and represents an
improvement on SARC membership. A tension and a potential for conflict
exist between the Ombudsman's statutory role and its role as a member
of the SARC. The statute provides that the Ombudsman is a liaison
between the agency and any affected person with respect to any problem
resulting from the agency's regulatory activities. On the SARC, the
Ombudsman is an agency deciding official. These two roles are
fundamentally different and to a degree inconsistent. As liaison, the
Ombudsman is required to be neutral, independent, and confidential. In
fulfilling its statutory role, the Ombudsman collects information from
the institution and the FDIC and attempts to promote communication
between the institution and the FDIC. As a member of the SARC, the
Ombudsman loses its liaison role and may be presented with actual,
potential or perceived conflicts to its neutrality, independence and
confidentiality. For example, the Ombudsman may receive confidential
information from an institution before the matter is appealed to the
SARC. If the Ombudsman is also a SARC member, he or she is placed in
the difficult position of either (1) using that confidential
information in the FDIC's decision-making process, even though the
information was obtained under a promise of confidentiality, or (2)
attempting to ignore information acquired in his or her Ombudsman role
no matter how important he or she may think the information is.
Making the Ombudsman a non-voting SARC member, as two commenters
suggested, does not solve this dilemma. The FDIC believes that
underlying tension between the two roles of the Ombudsman--as SARC
member and as liaison between the agency and any affected person--
places the Ombudsman in a potentially conflicted position best resolved
if the Ombudsman does not serve as a SARC member.\1\
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\1\ An express basis for one of the comments favoring keeping
the Ombudsman on the SARC is an expectation that the sort of
conflict discussed above will occur, i.e., the commenter stated that
the Ombudsman should remain on the SARC because the Ombudsman
facilitated discussions between the institution and examiners. Such
communications, however, were impermissible under the prior SARC
guidelines if they addressed the merits of an appeal; ``The merits
of any material supervisory determination for which an appeal has
been initiated or a final decision made will not be eligible for
consideration by the Ombudsman (except in his or her capacity as a
member of the Supervision Appeals Review Committee).'' The substance
of that limitation on the Ombudsman's role, once the matter has been
appealed to the SARC, is retained in the revised guidelines.
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The commenter's objection that the FDIC's proposal ``does not
conform with the statutory requirement'' for the Ombudsman is not
supported by the Riegle Act. The statute sets forth two duties for the
Ombudsman: To act as liaison between the agency and any affected person
and to assure that safeguards exist to encourage complainants to come
forward and preserve confidentiality. 12 U.S.C. 4806(d). ``Independent
appellate process'' is defined as review by an agency official who does
not report to the official who made the determination under review. 12
U.S.C. 4806(f)(2). No role for the Ombudsman as agency decision maker
regarding material supervisory determinations is articulated. The FDIC
believes that the proposed structure of the SARC fully complies with
the Riegle Act. Consistent with this view, neither the Federal Reserve
Board Ombudsman nor the Office of Thrift Supervision Ombudsman
participates in deciding material supervisory determinations within
those agencies.\2\ Under the prior guidelines, the Ombudsman could
consider the merits of matters under review by the DSC Director or on
appeal to the SARC only in its role as a SARC member. Under the revised
guidelines the subject matter of a material supervisory determination
that has been appealed to the SARC or that has been resolved in a final
SARC decision is ineligible for consideration by the Ombudsman. Thus,
unlike the prior guidelines, under the revised guidelines the Ombudsman
may consider the merits of a material supervisory determination for
which review has been requested from the DSC Director before the
institution has made an appeal to the SARC. In addition, the Ombudsman
may consider any other problem that an institution may have in dealing
with the FDIC.
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\2\ The Office of the Comptroller of the Currency's (OCC)
Ombudsman, in contrast, acts as both fact gatherer and sole deciding
official in material supervisory appeals, and did so prior to
passage of the Riegle Act. The Act's legislative history indicates
that pre-existing programs could continue: ``Some of the Federal
banking agencies have in place procedures to settle disputes between
the agency and a financial institution that may satisfy the
requirements of this [regulatory appeals process] provision. In
addition, some agencies, for example, the Comptroller of the
Currency, may already have appointed an Ombudsman to hear appeals.
Nothing in this section is intended to interfere with such existing
programs.'' H.R. Conf. Rep. No. 103-652 (Aug. 2, 1994), 1994
U.S.C.C.A.N. 1977, 2001, 1994 WL 405912.
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B. Procedures
Institutions that wish to obtain SARC review of material
supervisory determinations must file an appeal to the SARC within 30
calendar days from the date of the division director's written
determination. Unlike the prior process, institutions receive a written
determination issued by DSC within 30 days, setting forth the reasons
for the division's denial. Based on DSC's determination, institutions
decide for themselves whether to appeal to the SARC. If the issue
presented is not one that merits expending the time or effort of
seeking a SARC determination, the institution may decide not to appeal.
Under the new guidelines, that decision rests with the institution.
The depository institution, which had recently completed a SARC
appeal, complained that it was never informed of DSC's denial of its
request for review or that the request had been passed to the SARC. The
revised guidelines remedy this anomaly by providing that institutions
receive a DSC determination and then have the opportunity to decide for
themselves whether to file a SARC appeal. Another commenter expressly
supported this provision, saying that a written decision from the DSC
Director would ``add certainty'' to the status of a request.

[[Page 41482]]

An appeal to the SARC is considered filed if received by the FDIC
within 30 calendar days from the date of the determination being
appealed or if placed in the United States mail within 30 calendar days
from the date of that determination. Institutions must include their
name and address, the name and address of any representative, a copy of
the determination being appealed, and all of the reasons, factual or
legal, why the institution disagrees with the DSC Director's
determination. FDIC staff analyzes the filing for the SARC, but that
analysis is part of the intra-agency deliberative process and is not
disclosable to insured institutions. The SARC's written decision,
setting forth the SARC's rationale, is provided to the institution
within 60 days from the date the appeal is filed.
One commenter suggested that the SARC, in its written decision, and
the DSC Director, in its written determination of a request for review,
be required to respond separately to each argument advanced by an
institution in support of its request or appeal. A letter ``generally
denying'' a request, the commenter stated, does not demonstrate an open
commitment to communication, does not help an institution to understand
the basis for a denial, does not help an institution determine whether
to file an appeal with the SARC, leaves the impression that the request
was not given sufficient consideration, and is not useful as precedent.
While the FDIC understands these concerns in the comment and will work
to see that decisions issued in the SARC and AAC processes inform
institutions of the reasons(s) for the decision rendered, the
requirement that every issue raised be separately addressed in every
case would impose burdens that do not benefit the industry or the FDIC.
For example, in some cases issues may be raised that are insubstantial
or frivolous or that miss the point of the matter. In addition, issues
may be raised that have been presented and addressed in SARC or AAC
precedent that may be cited without reiteration. Accordingly, while the
FDIC will consider every issue raised in every case, every issue raised
need not be specifically addressed in a written opinion. See United
States v. Garza, 165 F.3d 312, 314 (5th Cir. 1999) (litigant's right to
have all issues fully considered and ruled on by the appellate court
does not equate to a right to a full written opinion on every issue
raised). For these reasons, the FDIC has decided not to adopt the
commenter's suggestion.
The SARC has the discretion, whether or not a request is made, to
determine to allow an oral presentation. If an institution wishes to
make an oral presentation, it should include in its appeal a statement
to that effect. Oral presentations, however, are granted only if the
SARC determines in its discretion that the oral presentation is likely
to prove helpful or is otherwise in the public interest. At the oral
presentation, the institution will present its position and respond to
any questions the SARC might have. The SARC, in its discretion, may
also require that FDIC staff participate in the oral presentation to
the extent the SARC deems appropriate.
One commenter proposed that the section governing ``Contents of
Appeal'' be amended to advise institutions to include a request for
oral presentation, if they so desire. The FDIC agrees with this
suggestion and the guidelines for both the SARC and the AAC have been
amended accordingly. The depository institution commented that denial
of oral presentation, where requested, should be separately noticed.
This comment too has been adopted and a provision has been added
mandating separate notice to the requesting institution of the SARC (or
AAC) determination regarding any request for oral presentation.
Separate notice will also be provided if a case is transferred by a
division director directly to the SARC (or AAC).
Only matters previously reviewed at the division level, resulting
either in a written determination or direct referral to the SARC, are
appealable to the SARC. Evidence not presented for review to the DSC
Director may be submitted to the SARC only if authorized by the SARC
Chairperson. No discovery or other such rights are created in the SARC
process.
The types of determinations eligible for review by the SARC and the
standards by which SARC appeals are decided remain unchanged from the
previous guidelines.
The provision for publication of SARC and AAC decisions, with
appropriate redactions to protect confidential information, was
expressly endorsed by one commenter.
The FDIC proposed to eliminate the provision in the original
guidelines that allowed for reconsideration of SARC decisions if new
information were submitted and good cause shown why that information
was material to the dispute. No institution ever invoked this
provision, and, in any event, the discretion to revise decisions is
implicit. One commenter, however, felt that retaining a reconsideration
provision would be helpful to institutions that may not understand that
such an avenue is available. The FDIC agrees with the commenter and the
revised SARC and AAC procedures provide for reconsideration of SARC and
AAC decisions if the institution can show an intervening change in the
controlling law or the availability of material evidence that was not
reasonably available when the decision was issued.

II. Guidelines for Appeals of Deposit Insurance Assessment
Determinations

The FDIC Board of Directors created the AAC in 1999 to provide a
high-level process for considering all deposit insurance assessment
appeals brought from determinations made by the appropriate FDIC
Divisions. Responsibility for deposit insurance assessments is shared
by the Division of Finance (``DOF''), DIR and, in some respects, DSC.
DOF is responsible for calculating the assessments owed by individual
insured institutions based on assessment risk classifications assigned
by DIR, which in turn uses supervisory information provided by DSC. To
calculate an institution's assessment, DOF applies the assessment rate
that corresponds to the institution's assessment risk classification to
that institution's assessment base. DOF determines the assessment base
from deposit and other data submitted in the institution's Report of
Condition or Thrift Financial Report. An insured institution may
request revision of its quarterly assessment payment by following the
procedures set forth at 12 CFR 327.3(h); similarly, an insured
institution may request review of its assessment risk classification by
following the procedures set forth at 12 CFR 327.4(d). Having complied
with those procedures and received a determination from the appropriate
division, an institution dissatisfied with that division's
determination may file an appeal with the AAC. After reviewing the
determination made at the division level, the AAC will issue a final
decision.

A. Membership

Since its creation in 1999, the AAC membership has included
individuals who are knowledgeable and experienced in matters related to
the FDIC's assessment activities, bringing to the AAC the necessary
experience and judgment to make well-informed decisions concerning
determinations on appeal. As originally constituted, the AAC membership
consisted of the Vice Chairperson of the Board (as Chairperson of the
AAC), the Deputy to the Office of the Comptroller of the Currency's
(``OCC'') member of the FDIC's Board of Directors, the Deputy to the
Office of Thrift Supervision's

[[Page 41483]]

(``OTS'') member on the FDIC's Board of Directors; the General Counsel,
the Director of the Division of Supervision and Consumer Protection;
the Deputy to the Chairperson and Chief Financial Officer or the DOF
Director; and the DIR Director.
Under the guidelines, AAC membership now consists of five (5)
voting members: (1) One inside FDIC Board member, either the Vice
Chairperson or the Director (Appointive), as designated by the FDIC
Chairperson (this person would serve as Chairperson of the AAC); (2) a
deputy or special assistant to the FDIC Chairperson, to be designated
by the FDIC Chairperson; (3) a deputy or special assistant to the OCC
member on the FDIC's Board of Directors; (4) a deputy or special
assistant to the OTS member on the FDIC's Board of Directors; and (5) a
deputy or special assistant to either the Vice Chairperson or the
inside FDIC Director (Appointive), whoever is not the AAC Chairperson.
The General Counsel is the sixth, and non-voting, member of the AAC.
The FDIC Chairperson may designate alternate member(s) to the AAC if
vacancies occur so long as the alternate member is not directly or
indirectly involved in making or affirming the determination under
review. A member of the AAC may designate and authorize the most senior
member of his or her staff within the substantive area to act on his or
her behalf in AAC matters.
Like the SARC guidelines, the AAC guidelines use the designation
``inside'' FDIC directors to distinguish them from the OTS and OCC
Directors, as suggested by a commenter. In addition, the term ``special
assistant'' has been added to clarify that directors may have both
deputies and special assistants who may serve on the AAC.

B. Procedures

Under the FDIC's assessment regulations, institutions that dispute
the computation of their quarterly assessment payments must comply with
the filing requirements set forth at 12 CFR 327.3(h) and institutions
that dispute their risk classification must comply with the filing
requirements set forth at 12 CFR 327.4(d).
Section 327.3(h) provides that an institution may request revision
of the computation of its quarterly assessment payment and sets out the
procedures for doing so. Any such request must be made within 60 days
of the quarterly assessment invoice for which a revision is requested,
or within 60 days of detection of an error in the institution's
quarterly Call Report and must include any supporting documentation.
Assessment audit and assessment refund determinations are also subject
to review under section 327.3(h), although not expressly mentioned in
the rule. Additional information requested by the FDIC must be provided
within 21 days. Section 327.3(h) mandates that the FDIC respond within
60 days and provides that the response should include the FDIC's
determination wherever feasible; otherwise, the FDIC's determination--
rendered by the Chief Financial Officer or designee (usually DOF)--is
to be made as promptly as possible.
Under section 327.4(d), an institution may request review of its
assessment risk classification within 90 days from the date it receives
notice of that classification by the FDIC. Supporting documentation
must be included with the request. Any additional information requested
by the FDIC must be provided within 21 days. The FDIC--through the
appropriate division--either DIR or DSC--must promptly notify the
institution of its determination.
An insured depository institution dissatisfied with the
determination made by the appropriate division pursuant to 12 CFR
327.3(h) or 327.4(d) may appeal that determination to the AAC. The AAC
reviews the determination being appealed and, unless the AAC determines
to refer the matter to the FDIC Board of Directors for consideration,
renders a final determination which constitutes final agency action.
FDIC staff analyzes the filing for the AAC, but that analysis is part
of the intra-agency deliberative process and is not disclosable to
insured institutions. The AAC's written decision, setting forth its
rationale, is provided to the institution.
As with the SARC, the AAC has the discretion, whether or not a
request is made, to allow an oral presentation. The institution's
appeal may contain a statement regarding whether it wishes to make an
oral presentation. Oral presentations are granted only if the AAC
determines in its discretion that oral presentation would be helpful or
would otherwise be in the public interest. At the oral presentation,
the institution presents its position and responds to any questions the
AAC might have. The AAC, in its discretion, may also require that FDIC
staff participate in the oral presentation to the extent the AAC deems
appropriate.
As stated in the SARC discussion, the suggestion of one commenter
that the section governing ``Contents of Appeal'' be amended to advise
institutions to include a request for oral presentation, if they so
desire, has been adopted. In addition, a provision mandating separate
notice to the requesting institution of the AAC's determination
regarding any request for oral presentation has been added as well.
Separate notice will also be provided if a case is transferred by a
division director directly to the AAC.
Only matters previously reviewed at the division level are subject
to AAC review. Evidence not presented for review to at the division
level may be submitted to the AAC only if authorized by the AAC
Chairperson. No discovery or other such rights are created in the AAC
process.
A reconsideration provision has been added to the AAC guidelines as
suggested by a commenter. Reconsideration of AAC decisions may be
granted if the institution can show an intervening change in the
controlling law or the availability of material evidence that was not
reasonably available when the decision was issued.
For the reasons stated in the SARC discussion, the FDIC has decided
not to add a provision requiring that AAC decisions address every issue
raised.
The Guidelines for Appeals of Material Supervisory Determinations
are set forth below. The Guidelines for Appeals of Deposit Insurance
Assessment Determinations immediately follow.
* * * * *
For the reasons stated in the Preamble, the Board has adopted the
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 (Public Law 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'').

[[Page 41484]]

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 is a non-voting member 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 the most senior member of his
or her staff within the substantive 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 (except
District banks) and insured branches of foreign banks) and also to
other insured depository institutions with respect to 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. Material
supervisory determinations include:
(a) CAMELS ratings under the Uniform Financial Institutions Rating
System;
(b) EDP ratings under the Uniform Interagency Rating System for
Data Processing Operations;
(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 adequacy of loan loss reserve
provisions;
(j) Classifications of loans and other assets in dispute the amount
of which, individually or in the aggregate, exceed 10 percent of an
institution's total capital;
(k) Determinations relating to violations of a statute or
regulation that may impact 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 (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 FDI Act
(which are contained in 12 CFR 308, subparts D, L, and M,
respectively), if the filing was originally denied by the DSC Director,
Deputy Director or Associate Director; and
(n) Any other supervisory determination (unless otherwise not
eligible for appeal) that may impact the capital, earnings, operating
flexibility, or capital category for prompt corrective action purposes
of an institution, or otherwise affect the nature and level of
supervisory oversight accorded an institution.
Material supervisory determinations do not include:
(a) Decisions to appoint a conservator or receiver for an insured
depository institution;
(b) Decisions to take prompt corrective action pursuant to section
38 of the Federal Deposit Insurance 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);
(d) Decisions to initiate formal enforcement actions under section
8 of the Federal Deposit Insurance Act, 12 U.S.C. 1818 (including
assessment of civil money penalties) or under any other provisions of
law or regulation; and
(e) Decisions to initiate informal enforcement actions (such as
memoranda of understanding).
The FDIC recognizes that, although determinations to take prompt
corrective action or initiate formal or informal enforcement actions
are not appealable, the determinations upon which such actions may be
based (e.g., loan classifications) are appealable provided they
otherwise qualify.

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/or the appropriate Regional Office is encouraged, but
seeking such a resolution is not a condition to filing a request for
review with the Division of Supervision and Consumer Protection or an
appeal to the SARC under these guidelines.

F. Filing a Request for Review With the FDIC Division of Supervision
and Consumer Protection

An institution may file a request for review of a material
supervisory determination with the Director, Division of Supervision
and Consumer Protection, 550 17th Street, NW., Room F-4076, Washington,
DC 20429, within 60 calendar days following the institution's receipt
of a report of examination containing a material supervisory
determination or other written communication of a material supervisory
determination. 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 has
considered the merits of the request and authorized that it be filed.
The Director, Division of Supervision and Consumer Protection, will
issue a written determination of the request for review, setting forth
the grounds for that determination, within 30 days of receipt of the
request. No appeal to the SARC will be allowed unless an institution
has first filed a timely request for review with the Division of
Supervision and Consumer Protection.

G. Appeal to the SARC

An institution that does not agree with the written determination
rendered by the Director of the Division of Supervision and Consumer
Protection must appeal that determination to the SARC within 30
calendar days from the

[[Page 41485]]

date of that determination. The Director's determination 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. Failure to file within the 30-day time limit may result
in denial of the appeal by the SARC. If the Director of the Division of
Supervision and Consumer Protection determines that an institution is
entitled to relief that the Director lacks delegated authority to
grant, the Director may, with the approval of the Chairperson of the
SARC, transfer the matter directly to the SARC without issuing a
determination. Notice of such a transfer will be provided to the
institution.

H. 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 from the date of
the division director's written determination or if the written appeal
is placed in the U.S. mail within that 30-day period. If the 30th day
after the date of the division director's written determination is a
Saturday, Sunday or Federal holiday, filing may be made on the next
business day. The appeal should be sent to the address indicated on the
determination being appealed.

I. 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
determination being appealed. If oral presentation is sought, that
request should be included in the appeal. Only matters previously
reviewed at the division level, resulting in a written determination or
direct referral to the SARC, may be appealed to the SARC. Evidence not
presented for review to the DSC Director may be submitted to the SARC
only if authorized by the SARC Chairperson. The institution should set
forth all of the reasons, legal and factual, why it disagrees with the
determination. Nothing in the SARC administrative process shall create
any discovery or other such rights.

J. 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.

K. Oral Presentation

The SARC may, in its discretion, whether or not a request is made,
determine to allow an oral presentation. The SARC generally grants a
request for oral presentation only if it determines that oral
presentation is likely to be helpful or would otherwise be in the
public interest. Notice of the SARC's determination to grant or deny a
request for oral presentation will be provided to the institution. If
oral presentation is held, the institution will be allowed to present
its positions on the issues raised in the appeal and to respond to any
questions from the SARC. The SARC may also require that FDIC staff
participate as the SARC deems appropriate.

L. Dismissal and Withdrawal

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.

M. Scope of Review and Decision

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, and notify the
institution, in writing, of its decision concerning the disputed
material supervisory determination(s) within 60 days from the date the
appeal is filed, or within 60 days from oral presentation, if held.
SARC 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 may reconsider its decision
only on a showing of an intervening change in the controlling law or
the availability of material evidence not reasonably available when the
decision was issued.

N. Publication of Decisions

SARC decisions will be published. Published SARC decisions will be
redacted to avoid disclosure of exempt information. Published SARC
decisions may be cited as precedent in appeals to the SARC.

O. SARC Guidelines Generally

Appeals to the SARC will be governed by these guidelines. The SARC
will retain the discretion to waive any provision of the guidelines for
good cause; the SARC may adopt supplemental rules governing SARC
operations; the SARC may order that material be kept confidential; and
the SARC may consolidate similar appeals.

P. Limitation on Agency Ombudsman

The subject matter of a material supervisory determination for
which either an appeal to the SARC has been filed or a final SARC
decision issued is not eligible for consideration by the Ombudsman.

Q. 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, Division of Supervision and
Consumer Protection, 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 authority will be
left to those parties to resolve.

R. 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 or affect the FDIC's
authority to take any supervisory or enforcement action against that
institution.

S. 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
which 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.

T. 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

[[Page 41486]]

appropriate disciplinary or remedial action. 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, 550 17th Street, Washington, DC
20429, 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 Division of Supervision and Consumer
Protection to resolve the allegation of retaliation. For the reasons
stated in the Preamble, the Board has adopted the Guidelines for
Appeals of Deposit Insurance Assessment Determinations as set forth
below.

Guidelines for Appeals of Deposit Insurance Assessment Determinations

A. Introduction

The Assessment Appeals Committee (``AAC'') was formed in 1999 and,
pursuant to the direction of the FDIC Board of Directors, has been
functioning as the appellate entity responsible for making final
determinations pursuant to Part 327 of the FDIC's regulations regarding
the assessment risk classification and the assessment payment
calculation of insured depository institutions. Institutions that
dispute the computation of their quarterly assessment payments must
comply with the time limits and other filing requirements set forth at
12 CFR 327.3(h). Generally, any such request may be made within 60 days
of the quarterly assessment invoice for which a revision is requested,
or within 60 days of the filing of an amendment to the institution's
quarterly report of condition. Institutions that dispute their risk
classification must comply with the time limits and other filing
requirements set forth at 12 CFR 327.4(d). Generally, an institution
may request review of its assessment risk classification within 90 days
from the date it receives notice of that classification by the FDIC.
The AAC provides a process for considering all deposit insurance
assessment appeals brought from determinations made by the appropriate
FDIC divisions pursuant to those regulations. The procedures set forth
in these guidelines apply to all appeals to the AAC.

B. AAC Membership

The following individuals comprise the five (5) voting members of
the AAC, representing each member of the FDIC Board of Directors: (1)
One inside FDIC Board member, either the Vice Chairperson or the
Director (Appointive), as designated by the FDIC Chairperson (this
person would serve as Chairperson of the AAC); (2) one of the deputies
or special assistants to the FDIC Chairperson, to be designated by the
FDIC Chairperson; (3) a deputy or special assistant to the Office of
the Comptroller of the Currency's member on the FDIC's Board of
Directors; (4) a deputy or special assistant to the Office of Thrift
Supervision's member on the FDIC's Board of Directors; and (5) a deputy
or special assistant to either the Vice Chairperson or the inside
Director (Appointive), whoever is not the AAC Chairperson. The General
Counsel is a non-voting member of the AAC. The FDIC Chairperson may
designate alternative member(s) for the AAC if vacancies occur. A
member of the AAC may designate and authorize the most senior member of
his or her staff within the substantive area of responsibility related
to cases before the AAC to act on his or her behalf.

C. Institutions Eligible to Appeal

These guidelines apply to all depository institutions insured by
the FDIC.

D. Determinations Subject to Appeal

The AAC, upon appeal by an insured depository institution, reviews
determinations of the Director of the Division of Insurance and
Research or the Director of the Division of Supervision and Consumer
Protection made pursuant to the procedures set forth at 12 CFR 327.4(d)
regarding the assessment risk classification assigned by the FDIC to
the institution and renders a final determination. The AAC also, upon
appeal by an insured depository institution, reviews determinations
made pursuant to 12 CFR 327.3(h) by the Chief Financial Officer (or the
Director of the Division of Finance, as designee) regarding the
computation of the institution's assessment payment and renders a final
determination.

E. Appeal to the AAC

An institution that does not agree with the written determination
rendered by the appropriate division director pursuant to 12 CFR
327.4(d) and 12 CFR 327.3(h) must appeal that determination to the AAC
within 30 calendar days from the date of the determination. The
division director's determination will inform the institution of the
30-day time limit for filing with the AAC and will provide the mailing
address for any appeal the institution may wish to file. Failure to
file within the 30-day time period may result in denial of the appeal
by the AAC.
If a division director determines that an institution is entitled
to relief that the director lacks delegated authority to grant, the
director may, with the approval of the Chairperson of the AAC, transfer
the matter directly to the AAC without issuing a determination. Notice
of such a transfer will be provided to the institution.

F. Filing With the AAC

An appeal to the AAC will be considered filed if the written appeal
is received by the FDIC within 30 calendar days from the date of the
division director's written determination or if the written appeal is
placed in the U.S. mail within that 30-day period. If the 30th day
after the date of the division director's written determination is a
Saturday, Sunday or Federal holiday, filing may be made on the next
business day. The appeal should be sent to the address indicated on the
determination being appealed.

G. Contents of Appeal

The appeal should be labeled to indicate that it is an appeal to
the AAC and should contain the name, address, and telephone number of
the institution and any representative, as well as a copy of the
determination being appealed. If oral presentation is sought, that
request should be included in the appeal. Only matters previously
reviewed at the division level, resulting in either a written
determination or a direct referral to the AAC, may be appealed to the
AAC. Evidence not presented for review at the division level may be
submitted to the AAC only if authorized by the AAC Chairperson. The
institution should set forth all of the reasons, legal and factual, why
it disagrees with the determination. Nothing in the AAC administrative
process shall create any discovery or other such rights.

H. 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.

I. Oral Presentation

The AAC may, in its discretion, whether or not a request is made,
determine to allow an oral presentation. The AAC generally grants a
request for oral presentation only if it determines

[[Page 41487]]

that oral presentation is likely to be helpful or would otherwise be in
the public interest. Notice of the AAC's determination to grant or deny
a request for oral presentation will be provided to the institution. If
oral presentation is held, the institution will be allowed to present
its position on the issues raised in the appeal and to respond to any
questions from the AAC. The AAC may also require that FDIC staff
participate as the AAC deems appropriate.

J. Dismissal and Withdrawal

An appeal may be dismissed by the AAC if it is not timely filed, if
the legal or factual basis for the appeal is not discernable from the
appeal, or if the institution moves to withdraw the appeal.

K. Scope of Review and Decision

The AAC will review all submissions concerning an appeal, review
the final determination being appealed, consider any other matters it
deems in its discretion to be appropriate, and issue a written decision
within 60 days from the date the appeal is filed, or within 60 days
from oral presentation, if held. The AAC may reconsider its decision
only on a showing of an intervening change in the controlling law or
the availability of material evidence not reasonably available when the
decision was issued.

L. Publication of Decisions

AAC decisions will be published. Published AAC decisions will be
redacted to avoid disclosure of exempt information. Published decisions
of the AAC may be cited as precedent in appeals to the AAC.

M. AAC Guidelines Generally

Appeals to the AAC will be governed by these guidelines. The AAC
will retain the discretion to waive any provision of the guidelines for
good cause; the AAC may adopt supplemental rules governing AAC
operations; the AAC may order that material be kept confidential; and
the AAC may consolidate similar appeals.

N. Effect on Deposit Insurance Assessment Payments

The use of the procedures set forth in these guidelines by an
insured institution will not affect, delay, or impede the obligation of
that institution to make timely payment of any deposit insurance
assessment.

By order of the Board of Directors.

Dated at Washington, DC this 28th day of June, 2004.

Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. 04-15635 Filed 7-8-04; 8:45 am]

BILLING CODE 6714-01-P

 

Last Updated 07/08/2004 regs@fdic.gov