AMERICA'S
COMMUNITY BANKERS
April 19, 2004
Mr. Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, D.C. 20429
Attention: Comments/Legal ESS
Re: Intra-Agency Appeal Process: Guidelines for Appeals of Material
Supervisory Determinations and Guidelines for Appeals of Deposit
Insurance Assessment Determinations
69 FR 12855 (March 18, 2004)
Dear Mr. Feldman:
America’s
Community Bankers (“ACB”)1 welcomes
the opportunity to comment on the Federal Deposit Insurance Corporation’s
(“FDIC”) proposed revisions to the Guidelines for Appeals
of Material Supervisory Determinations and the proposed Guidelines
for Appeals of Deposit Insurance Assessment Determinations.2 The
proposal would reconstitute the committees that review supervisory
and appellate
deposit insurance assessment determinations and would modify the
procedures for pursuing such appeals.
ACB Position
ACB supports making the appeals procedures regarding material supervisory
determinations and deposit insurance assessment determinations more
consistent. We also support adding certainty to the appeals process
by making it easier to understand and navigate.
We respect the
FDIC’s desire to ensure the integrity and legitimacy
of the appeals process by 1) eliminating the need for division directors
to recuse themselves frequently from the Supervision Appeals Review
Committee (“SARC”) and the Assessment Appeals Committee
(“AAC”) and 2) minimizing possible conflicts of interest
that may arise when the Ombudsman answers questions and helps institutions
through the appeals process while sitting as a voting member of the
SARC.
Specifically, ACB:
•
Supports requiring a written determination at the division level
regarding an institution’s request for review;
• Supports including the Ombudsman as a non-voting member of the SARC;
• Requests that the FDIC clarify that the SARC is composed of one inside
FDIC director and the deputies to the remaining two inside directors;
•
Requests that information regarding an institution’s request
for an oral presentation be added to the “Contents of Appeal” section
of the guidelines;
• Supports publishing SARC and AAC decisions that maintain confidentiality;
and
•
Opposes eliminating the guideline’s reconsideration provision.
Background
The Riegle Community
Development and Regulatory Improvement Act of 19943 required
the Federal banking
agencies to establish an independent
intra-agency appellate process to review material supervisory determinations.4 Under
current FDIC guidelines, a FDIC regulated depository institution
may request the Director of the Division of Supervision and Consumer
Protection (“DSC”) to review a material supervisory determination.
If the Director of DSC denies an institution's request for review,
the Director must forward the request directly to the SARC for its
appellate determination. Currently, the SARC consists of the FDIC
Vice Chairperson, the Director of the DSC, the Director of the Division
of Insurance and Research (“DIR”), the Ombudsman, and
the General Counsel.
The proposed revisions would reconstitute the SARC and would modify
the procedure for appealing to the SARC. Specifically, the proposal
would:
• Require
the Director of the DSC to issue a written decision regarding an
institution's
request for review of a material supervisory
determination within 30 days of the request;
• Eliminate automatic appeal from the Director of the DSC to the SARC.
Instead, institutions would be required to file an appeal with the
SARC; and
• Reduce the SARC from five to three voting members. SARC membership
would consist of one inside FDIC board member who would become the
SARC Chairperson and one deputy to each of the inside board members
who are not designated as the SARC Chairperson. The FDIC General
Counsel would be a non-voting member.
Similarly, the
Assessment Appeals Committee (AAC) was created in 1999 to provide
a high-level
process for considering all deposit
insurance assessment appeals. As established by existing FDIC regulation,
an insured institution may request the Chief Financial Officer of
the FDIC to review the institution’s quarterly assessment payment
and may request the Director of the DIR or the Director of the DSC
to review the institution’s assessment risk classification.
Having complied with these procedures, an institution that remains
dissatisfied with its assessment or risk classification may file
an appeal with the AAC.
The FDIC proposes
to issue Guidelines for Appeals of Deposit Insurance Assessment
Determinations,
that would reconstitute the AAC and would
establish procedures that parallel the proposed procedures for appealing
material supervisory determinations. Specifically, the AAC would
be reduced from seven to five voting members. The AAC would consist
of one FDIC board member (either the Vice Chair or the Director),
a deputy to the FDIC Chairperson, a deputy to the Office of the Comptroller
of the Currency’s member of the FDIC Board, a deputy to the
Office of Thrift Supervision’s member of the FDIC Board, and
a deputy to either the Vice Chair or the FDIC Director (whichever
does not chair the ACC). The FDIC General Counsel would serve as
a non-voting member.
Proposed Revised Guidelines for Appeals of Material Supervisory
Determinations
Written Determination.
ACB supports requiring the Director of Supervision and Consumer
Protection to issue a written determination within 30
days of receiving an institution’s request for review of a
material supervisory determination. We believe that the Director’s
written response will add certainty to the status of an institution’s
request.
Community banks
have expressed frustration with not knowing the status of a request
for review
that it has filed with the Director
of the DSC. Under the current process, the Director is not required
to respond to a request in writing. ACB has evidence that there have
been instances when the Director has forwarded the request for review
to the SARC without the institution’s knowledge.
ACB strongly
supports measures that enhance communications between the FDIC
and the institutions
is supervises. We believe that requiring
the Director of the DSC to formulate a written response to an institution’s
request for review would substantially improve the review process.
To further augment the appeals process, ACB suggests that when denying
a request for review, the Director of the DSC respond to each argument
that is advanced by an institution in support of its request for
review. We believe that a fact specific letter would 1) demonstrate
the FDIC’s commitment to open and effective communication;
2) help an institution understand why its request was denied; and
3) help an institution determine whether filing an appeal with the
SARC would be worthwhile.
Automatic Appeal. We do not expect that eliminating the automatic
appeal to the SARC will impose a substantial regulatory burden to
financial institutions. Even though an institution would be required
to file its own appeal with the SARC, an institution should be able
to rely upon the materials it prepared when seeking review at the
division level. This is largely because the scope of any appeal to
the SARC is limited to matters previously reviewed at the division
level.
SARC Membership.
Under the current guidelines, the Ombudsman serves dual roles that
may
call into question his or her independence. In
addition to advising institutions about the appeals process, the
Ombudsman is a voting member of the SARC. The proposed revisions
would eliminate the Ombudsman’s role on the SARC. While we
understand the potential for perceived conflicts under the existing
guidelines, we do not believe that the Ombudsman should be removed
from the SARC entirely. Rather, the Ombudsman should serve as a non-voting
member of the committee. The Ombudsman’s presence would be
particularly important for community banks that file their own appeals,
make oral presentations, and answer questions before the committee
without assistance from legal counsel or a consulting firm.
ACB also requests
the FDIC to minimize possible confusion regarding the composition
of
the SARC by clarifying that the committee is composed
of one inside FDIC director and the deputies to the remaining two
inside directors. Currently, the portion of the proposed guidelines
referring to the membership of the SARC committee are not reader-friendly.
Specifically using the term “inside directors” would
address this problem by clarifying which FDIC board members are eligible
for the SARC.
Oral Presentation.
The preamble to the proposed revisions indicates that an institution
that wishes to make an oral presentation to the
SARC should include such a request in its written appeal. We suggest
that the FDIC add this information to the “Contents of Appeal” or “Oral
Presentation” section of the guidelines.
Publication of
Decision. ACB strongly supports publishing SARC decisions. We believe
that
the decisions should be appropriately redacted to
preserve the anonymity of institutions bringing appeals. Published
decisions could serve as a tool for institutions that are contemplating
whether to pursue an appeal with the SARC, particularly since the
Director of the DSC would no longer forward requests for review automatically.
We specifically recommend that SARC decisions be made available on
the FDIC’s website.
We strongly urge
the SARC to adhere to the 60 day timeframe set forth in the proposed
guidelines.
One community bank reported that
the SARC did not consider its appeal for over two months after the
appeal was received. The institution’s request for an in person
meeting was never answered. The entire review process lasted approximately
seven months.
In addition,
we strongly urge the SARC to address each argument contained in
an institution’s appeal. We believe that a general
response will leave an institution, particularly a community bank,
with the impression that its request was not given sufficient consideration.
Moreover, a letter generally denying an institution’s request
would not be useful to other institutions researching published SARC
decisions to determine whether their own appeals to the SARC would
be worthwhile.
Reconsideration
Provision. ACB opposes eliminating the guideline’s
reconsideration provision. The current guidelines expressly state
that while SARC decisions constitute the final supervisory determination
of the FDIC, the SARC can reconsider its decision if new information
is presented and good cause is shown why that information is material
to the dispute. ACB does not believe that this provision should be
deleted even though the FDIC believes that the SARC has the implicit
authority to correct errors or omissions in the administrative process.
Eliminating the provision would not relieve administrative burden
for the FDIC, nor would it clarify the procedural process for financial
institutions. Instead, financial institutions would be less likely
to understand that this final, albeit unused, avenue is available.
Proposed Guidelines For Appeals of Deposit Insurance Assessment
Determinations.
The proposed Guidelines For Appeals of Deposit Insurance Assessment
Determinations were designed to parallel the appellate procedures
pertaining to material supervision determinations. Accordingly, ACB
reiterates our:
• Support for a written determination at the division level
regarding an institution’s request for review;
•
Suggestion that information regarding an institution’s request
for an oral presentation be added to the “Contents of Appeal” section
of the guidelines; and
• Support for publishing AAC decisions.
We also support including an express reconsideration provision similar
to that that is in the existing Guidelines for Appeals of Material
Supervisory Determinations.
Conclusion
Thank you for the opportunity to comment on this matter. Please
contact Krista Shonk at 202-857-3187 or at kshonk@acbankers.org should
you have any questions.
Sincerely,
Charlotte M. Bahin
Senior Vice President
Regulatory Affairs
_________________
1 America's Community Bankers represents
the nation's community banks. ACB members, whose aggregate assets
total more than $1 trillion, pursue progressive, entrepreneurial
and service-oriented strategies in providing financial services to benefit their
customers and communities.
2 69 Fed. Reg. 12855 (March 18, 2004).
3 Public Law 103-325, 108 Stat. 2160.
4 Determinations subject to appeal include CAMELS ratings, EDP ratings, trust
ratings, CRA ratings, consumer compliance ratings, registered transfer agent
examination
ratings; government securities dealer examination ratings; municipal securities
dealer examination ratings; adequacy of loan loss reserves; classifications of
assets in dispute the amount of which exceed 10 percent of an institution’s
total capital; determinations relating to violations of a statute or regulation
that may impact capital, earnings, operating flexibility of an institution, or
the nature and level of supervisory oversight accorded an institution, Truth
in Lending restitution, 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 FDI Act, if the filing
was originally denied by the Division of Supervision and Consumer Protection;
and other supervisory determinations that may impact the capital, earnings, or
operating flexibility of an institution or otherwise affect the supervisory oversight
accorded to an institution.
|
