Washington, DC — In an effort to address any potential legal uncertainty resulting from examiners’ reliance on guidance, policy statements, and similar communications as the basis for supervisory mandates, the Bank Policy Institute (BPI) and American Bankers Association (ABA) submitted letters Monday petitioning the banking agencies and the Bureau of Consumer Financial Protection (BCFP) for a formal rulemaking regarding the use of supervisory guidance.
Recently, and in response to growing concerns about regulators’ overreliance on guidance, bank regulators and the BCFP importantly issued an Interagency Statement confirming that supervisory guidance does not have the force of law, and that bank examiners should not take enforcement actions based on supervisory guidance. The Interagency Statement, a promising step forward, reaffirms the status of guidance under existing law. The question is how it changes regulatory practice. To institutionalize this recognition, and particularly to promote its prompt and consistent observance by examiners and other agency personnel, the BPI and ABA are asking for regulators to formalize the Interagency Statement in the form of a binding regulation, so as to ensure it endures over time and is followed consistently across the country.
“We commend your agency for issuing the Interagency Statement, which is an important step forward in ensuring that agency guidance is issued and applied in a manner consistent with the APA and the Congressional Review Act and, more broadly, that formal examination criticisms focus on matters material to the financial condition of a bank. Despite the helpful text of the Interagency Statement, we are concerned that it may nevertheless leave room for examiners to continue to base examination criticisms on matters not based in law,” wrote the Bank Policy Institute and American Bankers Association in the petition to banking agencies and the BCFP.
The petition process allows for individuals and groups to request specific regulatory changes. It will be up to the agencies to determine whether to accept or deny the petition. A formal rulemaking would be an explicit recognition by the agencies that current and future examiners will be bound by this statement which will provide greater clarity to the examination process. This is key, as 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 serves 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 any MRAs have been remediated. The Interagency Statement includes 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.
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.
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About the American Bankers Association. The American Bankers Association is the voice of the nation’s $17 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $13 trillion in deposits and extend more than $9 trillion in loans.