Banking groups to regulators: Codify policy on supervisory guidance

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WASHINGTON — The American Bankers Association and Bank Policy Institute are urging financial regulators to formalize their recent policy on the use of supervisory guidance

The Federal Reserve Board, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, Consumer Financial Protection Bureau and the National Credit Union Administration issued a joint statement in September to clarify the role of guidance. “Unlike a law or regulation, supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance,” the statement said.

In a letter to the agencies this week, the two banking industry groups applauded the statement, but asked the regulators to take it a step further with a binding regulation to codify that policy and “ensure it endures over time and is followed consistently across the country."

If the interagency statement is not codified, they argued, it could be viewed by current or future agency staff as nonbinding, and could leave room for examiners to continue to form examination criticism on matters not based in the law.

“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,” the ABA and BPI said in a press release. “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 is recognized as a “quasi-enforcement action,” and the agencies have often stated that a bank cannot expand through acquisition, investment or branching until all MRAs have been resolved.

“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,” the ABA and BPI said.

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