The FDIC Updates its Enforcement Actions Manual regarding Minimum Standards for Termination of Cease-and-Desist and Consent Orders
Summary:
The FDIC has updated chapter four of its Formal and Informal Enforcement Actions Manual (manual), entitled Cease-and-Desist Actions, regarding the agency’s minimum standards for terminating cease-and-desist and consent orders issued under Section 8(b) of the Federal Deposit Insurance (FDI) Act. The manual provides direction for professional staff related to the work necessary to pursue formal and informal enforcement actions. It is also intended to support the work of the field, regional, and Washington offices’ staff involved in supervising and assessing compliance with enforcement actions.
Statement of Applicability: The contents of, and material referenced in, this FIL apply to all FDIC-supervised financial institutions.
Highlights:
Section 8(b) of the FDI Act authorizes the FDIC to issue a cease-and-desist order, which is titled a “consent order” if the action is not contested, when the facts reasonably support the conclusion that an insured depository institution (IDI) has engaged, or is about to engage, in:
- An unsafe or unsound practice in conducting the business of the institution, or
- A violation of a law and/or regulation, written agreement with the FDIC, or written condition imposed by the FDIC in connection with the granting of any application or other request.
In 2022, the FDIC modified its procedures for terminating consent orders. The revised policy generally precluded termination of an order under Section 8(b) unless the IDI was in full compliance with all provisions of the order. Today, the FDIC is revising its policy to allow greater discretion in terminating such orders.
Specifically, section 8(b) cease and desist orders may be considered for termination under any of the following conditions:
- The IDI has achieved at least substantial compliance with the order.
- The order is no longer applicable to the IDI’s current circumstances, including situations in which the IDI is closed, self-liquidated, or merges.
- Deterioration leads to the issuance of a new or revised formal action.