SUPERVISORY ACTION—Guidelines for Appeals of Material Supervisory Determinations

Section 309 of the Riegle Community Development and Regulatory Improvement Act of 1994, 12 USC 4806, requires the Board and the other federal banking agencies to establish an independent, intra-agency process to review appeals of material supervisory determinations.

The purpose of these guidelines is to allow each Reserve Bank to administer its own appellate process, but to establish procedures under which all Reserve Banks’ appellate process must operate. Doing so will ensure that each Reserve Bank’s process is consistent with section 309 and that institutions will be granted the same appellant rights regardless of the Federal Reserve District in which they reside.

Any appeal of a material supervisory determination pursuant to section 309 shall be filed and considered pursuant to the following procedures.

Any appeal shall be approved by the board of directors of the institution, or in the case of a U.S. agency or branch of a foreign bank, the senior management person(s) responsible for the bank’s U.S. operations, and filed in writing with the secretary of the Reserve Bank or other appropriate Reserve Bank official within 30 calendar days of receipt of the written material supervisory determination, unless the time for filing is extended by the Reserve Bank. The Reserve Bank shall promptly provide a copy of the appeal to the appropriate division director of the staff of the Board of Governors.

Any appeal shall contain all the facts and arguments that the institution wishes to present. The appeal may be rejected for lack of clarity or information. In such case, the institution may refile the appeal within 30 calendar days of receipt of written notice of the rejection of any filing.

The appeal shall be considered in the first instance by a person or persons selected by the Reserve Bank (the review panel) who—

The appellant institution may appear before the review panel in order to present testimony and, with the consent of the review panel, witnesses. The review panel shall also solicit the views of the Reserve Bank staff involved in the determination under appeal, Board staff, and, where appropriate, the staff of other supervisory agencies (for example, in case of joint examinations or inspections). Nothing in this appeals process shall create any discovery or other such rights.

Any appeal shall be decided, in writing, by the review panel within 30 calendar days of the filing of an informationally complete appeal, unless the appellant and the review panel jointly agree to extend the time for decision.

Any appellant institution dissatisfied with the decision of the review panel may, with the consent of its board of directors of the institution, or in the case of a U.S. agency or branch of a foreign bank, the senior management person(s) responsible for the bank’s U.S. operations, appeal that decision to the Reserve Bank president by filing a written appeal with the secretary of the Reserve Bank or other appropriate Reserve Bank official within 30 calendar days of receipt of the review panel’s written decision. The appeal shall contain all facts and arguments that the institution wishes to be considered. The appeal may be rejected for lack of clarity or information. In such case, the institution may refile the appeal within 30 calendar days of receipt of written notice of the rejection. The appeal shall be decided by the Reserve Bank president, in writing, within 30 calendar days of the filing of an informationally complete appeal.

Any appellant institution dissatisfied with the decision of the Reserve Bank president may, with the consent of its board of directors of the institution, or in the case of a U.S. agency or branch of a foreign bank, the senior management person(s) responsible for the bank’s U.S. operations, appeal that decision to the appropriate governor by filing a written appeal with the secretary of the Board within 30 calendar days of receipt of the Reserve Bank president’s written decision. The appeal may be rejected for lack of clarity or information. In such case, the institution may refile the appeal within 30 calendar days of receipt of written notice of the rejection. The appeal shall be decided, in writing, by the appropriate governor, who shall consult with the director of the appropriate division of the Board of Governors, within 60 calendar days of the filing of an informationally complete appeal.

Each Reserve Bank shall establish appropriate safeguards to protect appellants from retaliation. The Board’s ombudsman will periodically contact institutions after their appeals have been decided in order to make certain that no retaliation has occurred. In addition, institutions who believe they have suffered retaliation as the result of an appeal may contact the Board’s ombudsman.

Each Reserve Bank shall make these guidelines and the Reserve Bank’s process for selecting a review panel available to each institution in its District, any institution appealing a material supervisory determination, and any member of the public who requests them.

Any institution about which the Federal Reserve makes a material supervisory determination is eligible for the appeal process. This includes state member banks, bank holding companies and their nonbank subsidiaries, U.S. agencies and branches of foreign banks, Edge and agreement corporations, third-party EDP servicers, and other entities examined or inspected by a Reserve Bank.

Whether an appealed action constitutes a “material supervisory determination” eligible for the appeals process shall be decided by the person or persons hearing the appeal, and a determination that the action is not appealable under these guidelines may be further appealed to the Reserve Bank president or the appropriate oversight governor in the same manner as any other adverse decision.

The term “material supervisory determination” includes, but is not limited to, material determinations relating to examination or inspection composite ratings, the adequacy of loan-loss reserves, and significant loan classifications. The term does not include any supervisory determination for which an independent right of appeal exists. Such actions include prompt-corrective-action directives issued pursuant to section 38 of the Federal Deposit Insurance Act, as amended (the FDI Act), actions to impose administrative enforcement actions under the FDI Act and the Bank Holding Company Act of 1956, as amended (the BHC Act), capital directives, and orders issued pursuant to applications under the BHC Act.

A material supervisory determination shall remain in effect while under appeal and until such time it is modified or overturned through the appeals process. The appeal of a material supervisory determination does not prevent the Federal Reserve from taking any supervisory or enforcement action— formal or informal—it deems appropriate to discharge the Federal Reserve’s supervisory responsibilities.

Section 309 expressly provides that it shall not affect the authority of the Board or any other agency to take enforcement or supervisory action against an institution. In such cases, the rights of appeal provided for in the statutes and regulations concerning these actions shall govern.