The agencies, including the CFPB, respond to petition to clarify 2018 statement that supervisory guidance violations should not lead to enforcement actions and hold future leadership to the terms of the statement.
10/22/2020 11:30
Several federal agencies issued a proposed rule this week on regulators’ supervisory guidance processes and to codify, with certain changes, a 2018 Interagency Statement Clarifying the Role of Supervisory Guidance.
The Federal Deposit Insurance Corporation, Board of the Governors of the Federal Reserve System, Office of the Comptroller of the Currency, National Credit Union Administration, and the Consumer Financial Protection Bureau are seeking comments on the proposed rule, which would “confirm that the agencies will continue to follow and respect the limits of administrative law in carrying out their supervisory responsibilities.”
The agencies recognize the important distinction between issuances that serve to implement acts of Congress (known as “regulations” or legislative rules”) and non-binding supervisory guidance documents, according to the proposal.
In November 2018, the agencies each received a petition for a rulemaking to codify the statement and bind future agency leadership and staff to the terms of the statement.
The petition also called for changes to the statement “concerning how supervisory guidance is used in connection with matters requiring attention, matters requiring immediate attention (collectively, MRAs), and other supervisory actions that should be clarified through a rulemaking.”
It also seeks to ensure that supervisory guidance is not connected to enforcement actions.
ACA International has long held that regulation through enforcement actions only focuses on potential problems without providing solutions for financial services companies to comply with regulations. ACA appreciates the agencies’ efforts to clarify the process and is reviewing the proposed rule to submit comments.
According to the proposed rule, the petition calls for the following updates to the 2018 statement:
- Implement changes in the agencies’ standards for issuing MRAs. Specifically, the petition requests that the agencies limit the role of MRAs to addressing circumstances in which there is a violation of a statute, regulation, or order, or demonstrably unsafe or unsound practices.
- Provide clarity that agencies will not base supervisory criticisms on a violation or non-compliance with supervisory guidance and will not issue an enforcement action as a result of a violation or non-compliance with supervisory guidance.
- Ensure that supervisory criticisms should not include “generic” or “conclusory” references to financial institutions conduct. The agencies agree that supervisory criticisms should continue to be specific as to practices, operations, financial conditions, or other matters that could have a negative effect on the safety and soundness of the financial institution, could cause consumer harm, or could cause violations of laws, regulations, final agency orders, or other legally enforceable conditions.
- MRAs, as well as memoranda of understanding, examination downgrades, and any other formal examination mandate or sanction, should be based only on a violation of a statute, regulations, or order, including a “demonstrably unsafe or unsound practice.
Comments on the proposed rule are due 60 days after publication in the Federal Register.
View the proposed rule for instructions on how to file comment with each agency.