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FDIC Federal Register Citations



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.


 

Last Updated 04/28/2004 regs@fdic.gov

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