The FDIC Board is considering today a proposed rule that would revise the FDIC’s regulations 1 concerning Section 19 of the Federal Deposit Insurance Act 2 to conform with the Fair Hiring in Banking Act, which was passed in December 2022. 3
Section 19 prohibits, without the prior written consent of the FDIC, a person with certain types of criminal offenses on their record from becoming or continuing as an institution-affiliated party; or from directly or indirectly owning, controlling, or participating in the conduct of the affairs of an insured institution. Further, the law forbids an insured institution from permitting such a person to engage in any conduct or to continue any relationship prohibited by Section 19.
The Fair Hiring in Banking Act significantly revised Section 19, notably by excluding several categories of previously covered offenses from the scope of Section 19’s prohibitions. The most significant changes include the exclusion of certain older offenses; convictions that have been expunged, sealed or dismissed; lesser offenses such as the use of fake identification, shoplifting, and fare evasion; misdemeanor offenses; and offenses involving the possession of controlled substances. The proposed amendments to the FDIC’s Section 19 regulations are primarily intended to align the regulations with the Act. The proposed amendments also address the FDIC’s procedures for reviewing applications filed under Section 19.
The proposed changes to Section 19 are consistent with the Act’s goal of reducing employment barriers and otherwise providing regulatory relief to individuals and insured depository institutions. In addition, the proposed changes streamline the FDIC’s Section 19 application process and provide additional transparency on the FDIC’s review of these applications.
In developing these proposed amendments, the FDIC has consulted and coordinated with the National Credit Union Administration, the Board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency “to promote consistent implementation [of the Act] where appropriate.” Additional details regarding the proposed changes and the FDIC’s implementation of the proposed changes are detailed in the NPR.
I am pleased to support the proposed changes, and I would like to thank the FDIC staff for their thoughtful work in bringing this proposed rule to the Board today. The proposed rule is being issued with a 60-day comment period, and I look forward to reviewing the comments the FDIC receives.