[Federal Register Volume 59, Number 249 (Thursday, December 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-32004]
[[Page Unknown]]
[Federal Register: December 29, 1994]
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DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
[94-264]
Supervisory Appeals Process: Guidelines
AGENCY: Office of Thrift Supervision, Treasury.
ACTION: Notice of proposed guidelines; request for comments.
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SUMMARY: The Office of Thrift Supervision (OTS) solicits comments on
proposed guidelines for the establishment of an independent intra-
agency appellate process to review material supervisory determinations
as required by the Riegle Community Development and Regulatory
Improvement Act of 1994. The OTS currently provides a supervisory
review process, which is described in Regulatory Bulletin (RB) 4a
(September 23, 1993). The OTS proposes to modify RB 4a to conform with
the requirements imposed by the new statute. This Notice sets out the
revised guidelines. RB 4a will remain in effect until the new
guidelines are issued in final form.
DATES: Comments must be received on or before February 27, 1995.
ADDRESSES: Comments should be directed to Director, Information
Services Division, Office of Thrift Supervision, 1700 G Street, NW.,
Washington, DC 20552, Attention Docket No. 94-264. These submissions
may be hand delivered to 1700 G Street, NW., from 9:00 A.M. to 5:00
P.M. on business days; they may be sent by facsimile transmission to
FAX number (202) 906-7755. Submissions must be received by 5:00 P.M. on
the day they are due in order to be considered by the OTS. Comments
will be available for inspection from 1:00 P.M. until 4:00 P.M. on
business days. Visitors will be escorted to and from the Public
Reference Room at established intervals.
FOR FURTHER INFORMATION CONTACT: Alvin W. Smuzynski, Assistant Director
of Supervision (202) 906-5669; or Valerie J. Lithotomos, Counsel
(Banking and Finance), Chief Counsel's Office; Office of Thrift
Supervision, 1700 G Street, NW., Washington, DC 20552.
SUPPLEMENTARY INFORMATION:
I. Introduction
Section 309 of the Riegle Community Development and Regulatory
Improvement Act of 1994, Pub. L. No. 103-325, 108 Stat. 2160, 2218-20
(September 23, 1994) (to be codified at 12 U.S.C. 4809) (the CDRI Act),
requires the Federal banking agencies, including the OTS, to establish
an ``independent intra-agency appellate process'' for the review of
``material supervisory determinations'' at insured institutions. The
statute requires the appeals process to be in place within 180 days of
its enactment. Within 90 days of enactment, the agencies are to provide
public notice and opportunity for comment on proposed guidelines for
the establishment of the process.
Decisions made during the supervisory process by the OTS's
examination and supervisory staff are often those that affect savings
associations most directly and most immediately. From time to time,
savings associations may disagree with supervisory decisions or with
the findings or conclusions upon which those decisions are based. It is
the intent of this proposal to provide a comprehensive and fair process
for the review of examination and supervisory findings and decisions.
The OTS encourages the resolution of supervisory disputes through
informal communications between savings associations and OTS regional
examination and supervisory staff. When disputes cannot be resolved
successfully at the regional level, savings associations may use the
supervisory appeals process that would be established by the proposed
guidelines to seek independent review by the Director of Supervision in
Washington.
The OTS currently provides a supervisory review process that
achieves these policy objectives and is consistent in many respects
with section 309 of the CDRI Act. That review process is described in
Regulatory Bulletin (RB) 4a, which was issued on September 23, 1993.
The OTS proposes to modify RB 4a to conform with the specific
requirements imposed by section 309. This Notice sets out the revised
guidelines with modifications from RB 4a that are described more
particularly below. RB 4a will remain in effect until the new
guidelines are issued in final form.
II. Description of the Proposed Supervisory Appeals Process
Independence
Section 309 of the CDRI Act sets forth certain standards that the
agencies' supervisory appeals process must satisfy. First, the process
must be ``independent.'' The statute defines independence to mean that
the review provided must be conducted ``by an agency official who does
not directly or indirectly report to the agency official who made the
material supervisory determination under review.''
The process established by RB 4a encourages dispute resolution at
the regional level by setting general guidelines for savings
associations to use in raising supervisory problems with regional
staff. RB 4a does not strictly require regional review as a
precondition to review in Washington. The RB does, however, require an
institution that has not attempted to resolve an issue at the regional
level to provide a ``detailed statement'' of its reasons for bypassing
regional review.
The OTS continues to believe that open discussion between
examination and supervisory staff at the regional level is often the
most productive and direct route to addressing an institution's
concerns. For this reason, the revised guidelines retain a description
of procedures available for use at the regional level. The OTS
continues to encourage savings associations to attempt to resolve
issues directly with examination or regional supervisory staff.
The proposed guidelines specify that the decisionmaker for
supervisory appeals is the Director of Supervision in Washington, and
they explicitly provide that an institution is not required to seek
regional review as a precondition to submitting a supervisory appeal.
In addition, an institution electing to appeal directly to the Director
of Supervision without prior regional review would no longer be
required to submit a ``detailed statement'' of its reasons for doing
so. The OTS will continue to ask an institution whether or not it has
sought regional review.
The Director of Supervision reports directly to the Director of the
OTS. This reporting arrangement satisfies the independence requirement
of section 309.
Prompt Disposition of Appeal
The statute also requires that the supervisory appeals process be
structured so that appeals are ``heard and decided expeditiously.'' RB
4a sets deadlines for review at both the regional and Washington
levels. Based on its experience with requests for review filed under
the RB 4a process and on adjustments in its internal procedures for
handling such requests, the OTS proposes a deadline of 60 days for the
Director of Supervision to decide a supervisory appeal.
Material Supervisory Determinations
Section 309 of the CDRI Act requires that the appeals process be
available for the review of ``material supervisory determinations,'' a
term defined by the statute. RB 4a currently provides that ``[t]he OTS
will review all decisions or actions'' with the exception of those
specifically excluded from the process. The OTS notes that this broad
scope provision, which is retained in the proposed guidelines, allows
for the appeal of a wider range of supervisory determinations than is
required by the statute. For example, under both the current RB 4a
process and the revised guidelines, savings associations may appeal
classifications not only of loans but of other assets as well. In order
to make it clear that the supervisory appeals process covers the
determinations that are explicitly mentioned in the statute, the
proposed guidelines specifically include ``material supervisory
determinations'' as within the scope of the appeals process and add a
definition of the term that conforms with the statute. The reference to
``examination ratings'' in the definition should be read to include
ratings for any type of examination that the OTS conducts, including
examinations for compliance with the Community Reinvestment Act and
other statutory or regulatory requirements as well as trust, electronic
data processing (EDP), and safety and soundness examinations.
The OTS proposes to exclude from the section 309 appeals process
matters for which a special review process is available. For example,
the agency is now finalizing a process specifically designed to allow
certain savings associations: (a) to seek an adjustment to the interest
rate risk methodology as it applies to them, or (b) to request
authorization to measure their interest rate risk using their own
methodology. Institutions wishing to obtain this type of review must
use the separate review process established for that purpose. If the
specialized review process results in a decision that is adverse to the
institution and that triggers a supervisory action, the institution may
appeal the supervisory action using the section 309 supervisory appeals
process described here.
The statute specifically exempts from the supervisory appeals
process decisions to appoint a conservator or receiver and decisions to
take action pursuant to the prompt corrective action provisions of
section 38 of the Federal Deposit Insurance Act, 12 U.S.C. 1831o. The
former exclusion already appears in RB 4a; the latter is added. The
revised guidelines also retain the exclusions for preliminary
examination results and formal enforcement-related actions.
Examiner Retaliation
Section 309 requires that the appeals process contain ``appropriate
safeguards'' for protecting the institution from retaliation by agency
examiners. Accordingly, the OTS proposes to modify RB 4a by making
explicit its policy of prohibiting any employee, including examiners
and supervisory staff, from taking retaliatory action against a savings
association that pursues an avenue of review or appeal.
Separately, section 309 of the CDRI Act requires the OTS to appoint
an Ombudsman whose duties are to include assuring ``that safeguards
exist to encourage complainants to come forward and preserve
confidentiality.'' As the revised guidelines indicate, the OTS does not
contemplate that its Ombudsman will be involved in the substantive
review of supervisory decisions. The agency intends, however, that the
Ombudsman will be the appropriate recipient for complaints of
retaliation and that the Ombudsman's responsibilities will include the
investigation and resolution of such complaints. The OTS will take
disciplinary action against any employee who is found to have acted in
retaliation against an institution that seeks review or appeal of a
supervisory determination. The revised guidelines reflect this method
of establishing safeguards against retaliation.
III. Request for Comment
The OTS seeks comment on all aspects of the proposed guidelines and
specifically with respect to the following issues:
(1) The guidelines are intended to provide a framework for
decisionmaking but also to allow for sufficient flexibility that
procedures may be tailored to individual circumstances. With respect to
both the scope of the supervisory appeals process and the procedures
set out, do the guidelines contain enough specificity to provide useful
guidance to institutions on when and how to proceed? Commenters
addressing this issue are encouraged to offer suggestions for ways in
which the guidelines could be made more specific without sacrificing
flexibility.
(2) Are the timeframes established in the guidelines reasonable and
practical?
(3) Should the appeals process be available to entities other than
insured savings associations that OTS has the authority to examine?
Such entities include savings and loan holding companies, affiliates of
savings associations, and electronic data processing servicers.
(4) Do terms such as ``examination ratings,'' ``adequacy of loan
loss provisions,'' or ``significant'' loan classifications require
further definition?
(5) The OTS generally takes the approach that an institution must
comply with the supervisory determination under review during the
pendency of its appeal. The agency intends that the Director of
Supervision could, on a case-by-case basis, stay the institution's
obligation to comply while the appeal is in process. Should the
presumption be reversed, so that the effect of supervisory
determinations is generally stayed unless the decisionmaker
specifically requires compliance?
(6) Is it appropriate to segregate complaints of retaliation from
the substance of the appeals process by authorizing the Ombudsman to
handle the former complaints and the Director of Supervision to decide
the substance of the appeal?
Supervisory Appeals Process
Regulatory Bulletin 4b
Background
The Riegle Community Development and Regulatory Improvement Act of
1994 requires that the OTS (as well as the other Federal banking
agencies) establish an intra-agency appellate process for the review of
material supervisory determinations made at insured institutions. This
Bulletin establishes the guidelines that govern the OTS's supervisory
appeals process. It modifies the guidelines that the OTS previously
followed for its supervisory review process, which were set forth in
Regulatory Bulletin 4a (September 20, 1993). Regulatory Bulletin 4a is
rescinded.
Policy Statement
Decisions made during the supervisory process by the OTS's
examination and supervisory staff are often those that affect savings
associations most directly and most immediately. From time to time,
savings associations may disagree with supervisory decisions or with
the findings or conclusions upon which those decisions are based. It is
the intent of this policy statement to provide a comprehensive and fair
process for the review of examination and supervisory findings and
decisions. The OTS encourages the resolution of supervisory disputes
through informal communications between savings associations and OTS
regional examination and supervisory staff. If disputes cannot be
resolved successfully at the regional level, however, savings
associations may seek independent review by the Director of Supervision
in Washington.
Scope of the Supervisory Appeals Process
The OTS will review all supervisory decisions or actions, including
material supervisory determinations, except those that are listed
below.
Material supervisory determinations are those relating to:
Examination ratings;
The adequacy of loan loss reserve provisions; and
Loan classifications on loans that are significant to the
savings association.
OTS decisions and actions that may not be appealed include:
The appointment of a conservator or receiver;
Preliminary examination conclusions prior to issuance of a
final report of examination;
Any formal enforcement-related action, such as decisions
to initiate a formal investigation, to file a notice of charges, or to
assess civil money penalties; or
Any decision to take action pursuant to the prompt
corrective action provisions that appear at section 38 of the Federal
Deposit Insurance Act, 12 U.S.C. 1831o.
Matters that are subject to a special appeals or review process
designed specifically for the matter in dispute are not immediately
appealable through this supervisory appeals process. If the special
appeals or review process results in a supervisory action that is
adverse to the institution and that appeals process does not meet the
standards of section 309 of the CDRI Act, the institution may appeal
the supervisory action using the process established by these
guidelines.
Procedures for Resolving Disagreements at the Regional Level
A. During the Examination
If a disagreement arises during the on-site examination, the
difference should be raised directly with the examiner-in-charge (EIC)
while the EIC is at the institution. If issues remain unresolved, the
institution should request that the Field Manager be included in the
discussions. Disagreements will be briefly noted in the final report of
examination (ROE).
B. With the Regional Office
Institutions are encouraged to raise examination-related
disagreements that cannot be resolved during the examination with the
Regional Office. A supervisory decision in dispute may be raised either
orally or in writing to the Assistant Director, Regional Deputy
Director, or Regional Director or his designee. If the institution
elects to state the issue or problem in writing, the Chief Executive
Office (CEO) may file a request for reconsideration by describing the
issue or problem and specifying the related facts. The Regional Office
will act within 30 days of receipt of an appeal, unless the Regional
Director notifies the institution, in writing, that the decision will
take longer than 30 days, the reason additional time is needed, and the
expected date for a decision.
The Supervisory Appeals Process
A. The Institution's Appeal Submission
While savings associations are encouraged to attempt to resolve
disagreements through discussion with regional examination and
supervisory staff and through review at the regional level, regional
discussion and review are not preconditions for taking an appeal to the
Director of Supervision in Washington, D.C.
If the above-described discussions or appeals do not result in
satisfactory resolution of the disagreement or if the institution
elects to use the supervisory appeals process without first obtaining
regional review, an appeal may be filed with the Director of
Supervision. The following procedures apply:
The Board of Directors must review the request for an
appeal and forward one copy of its resolution authorizing such action.
The institution will have 60 calendar days from its
receipt of a material supervisory determination or, where appropriate,
of the document transmitting the Regional Office's decision, to file a
request for an appeal with the Director of Supervision. Requests for
appeal should be directed to: Director of Supervision, Attention:
Assistant Director, Office of Thrift Supervision, 1700 G Street, N.W.,
Washington, D.C. 20552.
The request should be limited to five pages and should
contain:
--A concise statement of the dispute and why it is material. For
example, identify the precise loan(s), property, appraisal, etc.
--The remedy being sought and its financial impact.
--A statement of whether the institution has attempted to resolve
the dispute at the regional level.
--A citation to any applicable statutes, regulations, policies, or
procedures on which the institution relies.
--Confirmation that the institution has, in the interim, complied
with the supervisory actions being reviewed.
--Copies of any relevant excerpts from the current examination,
appraisal report, or correspondence with the region about the action or
decision. (These copies do not count toward the 5-page limit.)
--The name, address, and telephone number of the individual at the
institution designated to provide additional information (if required).
No fee is required for submission of the request.
Institutions are encouraged to minimize costs by preparing review
requests themselves rather than using outside attorneys, accountants,
or consultants. If warranted by the circumstances and agreed to by the
institution, OTS may use outside experts to evaluate issues. In such
circumstances, the institution will pay the costs of such experts.
B. Review by the Director of Supervision
The OTS will acknowledge receipt of a supervisory appeal
within 5 calendar days of receipt.
Within 15 calendar days of receipt, the OTS will make a
request for any additional information necessary to complete the
decision on the appeal.
The institution shall furnish the additional information
as soon as possible or within 15 calendar days of the date of the OTS's
request, unless the time is extended by the Director of Supervision or
his designee.
Absent unusual circumstances, the OTS will provide its
decision on the appeal within 60 calendar days of receipt of the
request for appeal or, if additional information is requested, within
60 calendar days of receipt of any additional information.
Any of the above timeframes may be extended by the
Director of Supervision or his designee. Any extensions granted will be
in writing, and will include the reason for the extension, and the
expected date that a decision will be made.
Effect of Initiating a Supervisory Appeal
An institution's appeal will not suspend or delay the pursuit of
any enforcement action or formal investigation. An appeal will not stay
the obligation of an institution or institution-affiliated party to
comply with any order or other determination resulting from an
enforcement action. An appeal will not operate automatically to relieve
the savings association of its obligation to comply with the
supervisory determination under review. Upon the request of the savings
association filed simultaneously with its appeal, the Director of
Supervision may, however, relieve the institution of that obligation to
comply during the pendency of its appeal in Washington. OTS retains the
right to take any action and to apply any standards deemed appropriate
to ensure the safety and soundness of an institution.
Prohibition on Retaliation
The OTS prohibits any employee, including members of its
examination and supervisory staff, from acts of retaliation against a
savings association that appeals a supervisory determination.
Separately, the OTS intends to appoint an Ombudsman whose
responsibilities include the investigation and resolution of complaints
of retaliation made by a savings association. Such complaints may be
made at any time to: Office of Ombudsman, Office of Thrift Supervision,
1700 G Street, N.W., Washington, D.C. 20552.
The OTS will take appropriate disciplinary action against any
employee who is found to have violated the prohibition on retaliation.
Dated: December 22, 1994.
By the Office of Thrift Supervision.
John F. Downey,
Director of Supervision.
[FR Doc. 94-32004 Filed 12-28-94; 8:45 am]
BILLING CODE 6720-01-P
