On January 19, 2021, the FDIC’s Board of Directors approved revised Guidelines for Appeals of Material Supervisory Determinations (the “Guidelines”), which are applicable to insured depository institutions (“IDIs”) the FDIC supervises as well as other IDIs for which the FDIC makes material supervisory determinations. The FDIC stated that the amendments are intended to: (1) improve the independence of appeals decisions via the implementation of an independent, standalone office—the Office of Supervisory Appeals (the “Office”)—that will replace the existing Supervision Appeals Review Committee (the “SARC”); and (2) clarify the procedures and timeframes applicable to appeals, including those relating to formal enforcement actions.
Under Section 309(a) of the Riegle Community Development and Regulatory Improvement Act of 1994 (the “Act”), the FDIC and other federal banking agencies are required to “establish an independent intra-agency appellate process” to “review material supervisory determinations made at insured depository institutions or at insured credit unions that the agency supervises.” Under the Act, “material supervisory determinations” include determinations involving examination ratings, loan classifications for loans that are significant to the IDI, and the adequacy of loan loss reserve provisions. The FDIC first adopted the Guidelines to implement its obligations under the Act in March 1995, and established the SARC to oversee appeals of material supervisory determinations. The SARC is presently composed of three voting members (one of the FDIC’s three inside directors, and one deputy or special assistant to each of the other two inside directors) and one non-voting member (the FDIC’s General Counsel).
The revised Guidelines replace the SARC with the Office—a fully independent entity with the authority to review and resolve material supervisory determinations, composed entirely of external, non-governmental officials who have bank supervisory or examination experience. The Office will act independently of the FDIC divisions that issue the material supervisory determinations, and any IDI that does not agree with a material supervisory determination may appeal to the Office within 30 days after that date of receipt of the determination being challenged. Appeals submitted to the Office will be reviewed by a panel comprised of either three or five officials of the Office. The IDIs will bear the burden of proof as to all matters at issue in the appeal, and the Office will not handle any aspect of an appeal seeking to modify or change existing FDIC rules or policy.
The revised Guidelines also include the following changes:
- requiring communications made between the Office and either the appealing institution or supervisory staff to be shared with the opposing appellate party;
- allowing an appealing institution to request expedited review of its appeal; and
- modifying the procedures and timeframes for appealing determinations underlying formal enforcement-related actions.
The revised Guidelines will take effect once the Office is operational, and the FDIC has not indicated when that is expected to occur. Until that time, the current Guidelines will remain in effect, and the SARC will continue to oversee the appeals process.