Effective July 18, 2017, the FDIC has adopted amendments to its Guidelines for Appeals of Material Supervisory Determinations.  The FDIC proposed the amendments last August and received only two comment letters, one from a trade association and the other from a financial holding company.

The amendments are intended to provide institutions with broader avenues of redress with respect to material supervisory determinations and enhance consistency with the appeals process of other federal banking agencies.  The term “material supervisory determinations” is defined by the Reigle Act to include determinations relating to (1) examination ratings; (2) the adequacy of loan loss reserve provisions; and (3) classifications of loans that are significant to an institution.  The Guidelines list the types of determinations that constitute “material supervisory determinations.”   Under the Guidelines, an institution may not file an appeal to the Supervision Appeals Review Committee (SARC) unless it has first filed a timely request for review of a material supervisory determination with the Division Director.

The amendments expand the definition of “material supervisory determination” by allowing determinations regarding an institution’s level of compliance with a formal enforcement action to be appealed as a material supervisory determination.  However, if the FDIC determines that lack of compliance with an existing enforcement action requires further enforcement action, the proposed new enforcement action would not be appealable.  Matters requiring board attention are also added to the list of appealable material supervisory determinations.

The amendments remove decisions to initiate informal enforcement action (such as a Memorandum of Understanding) from the list of determinations that are not appealable and add such decisions to the list of appealable material supervisory determinations.

Other amendments include the following:

• A clarification that a formal enforcement-related action would commence and become unappealable when the FDIC initiates a formal investigation under 12 U.S.C section 1820(c) or provides written notice to the institution of a recommended or proposed formal enforcement action under applicable statutes or published enforcement-related FDIC policies, including written notice of a referral to the Attorney General pursuant to the ECOA or a notice to HUD for ECOA or FHA violations.
• An amendment providing that when an institution has filed an appeal of a material supervisory determination through the SARC process, the appeal will not be affected if the FDIC subsequently initiates a formal enforcement-related action or decision based on the same facts and circumstances as the appeal.
• An amendment providing for the publication of annual reports on Division Directors’ decisions with respect to requests by institutions for review of material supervisory determinations.
• An amendment providing that the current standard for review for SARC appeals also applies to Division-level reviews.