When Is Supervisory Guidance By Banking Regulators Not A Rule To Live By? When There Is A Rule That Says So.

Saul Ewing Arnstein & Lehr LLP
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Saul Ewing Arnstein & Lehr LLP

On September 11, 2018, an interagency statement was issued by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp., the National Credit Union Administration and the Consumer Financial Protection Bureau  that sought to clarify the limited role of the guidance that they issue. Following this, two banking industry advocacy groups, the Bank Policy Institute and the American Bankers Association, filed a petition with regulators on November 5, 2018 that requested a formal rulemaking on the subject. On October 21, 2020, the agencies jointly issued a proposed rule that would codify the 2018 interagency statement to establish that supervisory guidance is not binding or enforceable at law.

The proposed rule provides that "[b]y codifying the 2018 statement, the proposed rule is intended to confirm that the agencies will continue to follow and respect the limits of administrative law in carrying out their supervisory responsibilities.” The proposed rule would specifically provide that supervisory guidance "does not create binding legal obligations." According to the proposed rule, the agencies issue supervisory guidance, including interagency statements, advisories, bulletins, policy statements, Q&As, and FAQs, that merely put forth the agencies' "general views regarding appropriate practices for a given subject.” In addition, the proposed rule states that the agencies will not issue enforcement actions or so-called matters requiring attention, or MRAs, on the basis of a "violation" of or "non-compliance" with supervisory guidance.

Although this rule should be helpful for the lending industry as a whole because it will prevent the agencies from citing them for conduct that is frowned on in guidance but does not violate a statute or regulation, guidance may nevertheless still form the basis for agency investigations.

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