The banking agencies can require banks to take corrective actions through nonpublic supervisory processes, which operate outside of formal enforcement proceedings and typically do not involve public disclosure.
In the past, and under the law, a banking agency’s only recourse to force a bank to change its practices was a formal enforcement order that came with the right of the bank to receive notice of the charges and contest them via an administrative process reviewable in court.
Currently, banks have limited avenues to challenge a supervisory mandate, and the formal appeals process is infrequently used.
Federal law authorizes the banking regulators to bring a range of enforcement actions against banks and bank holding companies if the bank and bank holding company is engaging in or has engaged in:
- An unsafe or unsound practice; and/or
- A violation of law.
If contested by the bank/bank holding company, these enforcement actions are typically decided before an administrative law judge, without a jury trial and with very limited rights to judicial appeal. Because of this, banks/bank holding companies often do not even seek to challenge an enforcement action and inevitably settle with the agency. As for individual bankers, contested hearings rarely result in favor of the banker.
Because enforcement actions can have significant consequences and the avenues for contesting or appealing them are limited, the potential for such actions gives banking regulators substantial influence over the corrective measures banks choose to implement.
Types of Enforcement Actions
For additional information on the specific types of enforcement actions, BPI’s CEO Greg Baer explains.
