Washington, D.C. — The Bank Policy Institute this weekend filed a comment letter with the federal banking agencies, Consumer Financial Protection Bureau and National Credit Union Association responding to a notice of proposed rulemaking that would establish that supervisory guidance is nonbinding and cannot give rise to a Matter Requiring Attention (MRA) in the examination process. BPI expressed strong support for the core elements of the proposal, which would codify the agencies’ 2018 Interagency Statement Clarifying the Role of Supervisory Guidance.
“This proposal is an important step forward for those that support the rule of law,” said Greg Baer, president and CEO of the Bank Policy Institute. “It will go a long way toward ensuring examination mandates are based on material issues as opposed to subjective views. We appreciate the agencies’ commitment to providing more clarity and certainty in the examination regime.”
The proposal would expressly prohibit issuing MRAs on the basis of a “violation of” or “non-compliance with” supervisory guidance, which is nonbinding and does not have the force and effect of law. Of equal importance, it would bar issuance of an MRA based solely on a general claim that it relates to “safety an soundness,” without some documentation of how the matter could actually damage the institution.
However, the comment letter requests that the agencies eliminate carveouts in the proposal for “interpretive rules” which could undermine the overall intent of the proposal of providing clarity on the nature of guidance. Interpretive rules, like supervisory guidance do not have the force and effect of law. The comment letter also requests that the agencies clarify the standards and consequences that apply to MRAs and other supervisory consequences, and clarify that an MRA also cannot be based on “reputational risk” without identifying an underlying practice or violation of law giving rise to that risk.
The NPR was issued in response to BPI and ABA’s November 2018 petition for rulemaking under the Administrative Procedure Act – the first use of this statutory mechanism for regulatory review. BPI and ABA filed the petition because in recent years, failure to comply with guidance has too often resulted in the issuance of MRAs based on neither law nor regulation. An MRA can serve as a quasi-enforcement action, and the banking agencies have in the past taken the position that a bank may not expand by acquisition, investment or branching until particular MRAs have been remediated.
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.