Banking Regulators Respond to BPI and ABA’s Petition Codifying Guidance Is Nonbinding

Banking Regulators Respond to BPI and ABA’s Petition Codifying Guidance Is Nonbinding

Media Contacts:
Sean Oblack

Ian McKendry

Washington, D.C. — Responding to a 2018 petition for rulemaking from the Bank Policy Institute (BPI) and the American Bankers Association (ABA), the federal banking agencies today issued a notice of proposed rulemaking (NPR) that would establish that regulatory guidance is nonbinding and cannot form the basis for a Matter Requiring Attention (MRA) in the examination process.  The NPR also requires that MRAs be based on specific matters and not generic or conclusory references to “safety and soundness.”  In November 2018, BPI and the ABA submitted a letter petitioning the agencies for a formal rulemaking under the Administrative Procedure Act – the first use of this statutory mechanism for regulatory review.

“The agencies deserve considerable credit for reviewing their practices and seeking public comment on them,” said Greg Baer, president and CEO of the Bank Policy Institute. “While much work remains to be done to ensure that the examination process is objective and fair, this proposal is a great first step.”

“We commend the agencies for issuing a proposed rulemaking that would codify the role of supervisory guidance,” said Rob Nichols, ABA president and CEO. “We look forward to continuing to work with them to improve the examination process so it is fair and consistent.”

BPI and ABA filed the petition because in recent years, failure to comply with guidance has too often resulted in the issuance of Matters Requiring Attention (MRA) based on neither law nor regulation. An MRA can serve as a quasi-enforcement action, and the banking agencies have routinely taken the position that a bank may not expand by acquisition, investment or branching until particular MRAs have been remediated. A 2018 Interagency Statement included unclear language regarding how guidance could be used beyond raising issues of supervisory concern with an institution (such as MRAs), straying into explicit enforcement action unsupported by law.

Today’s NPR clarifies that the 2018 statement is binding on all agencies. The NPR notes that agencies will not base supervisory criticism, such as MRAs, or enforcement actions on a violation of supervisory guidance, but that examiners may reference guidance to provide examples of safe and sound conduct.  Further, it provides that supervisory criticisms will be specific to matters that could have a negative effect on safety and soundness rather than including generic or conclusory references to safety and soundness.-30-

About Bank Policy Institute.

About the Bank Policy Institute. The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

About the American Bankers Association.

About the American Bankers Association
The American Bankers Association is the voice of the nation’s $21.1 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $17 trillion in deposits and extend nearly $11 trillion in loans.