comment letter

Joint Comment Letter to FDIC re Supervisory Appeals


Dear Mr. Sheesley:

We, the undersigned banking trade associations, write to collectively voice our concern with the FDIC’s recent decision to summarily eliminate the Office of Supervisory Appeals (“the OSA”) and reinstate the agency’s Supervision Appeals Review Committee (“the SARC”).  The Associations strongly object to the FDIC’s decision on substantive and procedural grounds.  Not only do we believe the SARC is a flawed forum and decisionmaker for the intra-agency supervisory appeals process, but the agency’s announcement of this decision without any prior notice to the public or opportunity to comment fails to take into account fundamental due process rights.

On December 6, 2021, the FDIC issued a Financial Institution Letter (FIL-77-2021) announcing that the OSA is now fully operational, and that the revised Guidelines for Appeals of Material Supervisory Determinations are fully in effect (the “Appeals Guidelines”). Only five months later, and notwithstanding the FDIC’s multi-year efforts to establish, fund, staff, and operationalize the OSA, and the public’s submission of comments two years ago that overwhelmingly supported the creation of the OSA as an alternative to the SARC, the FDIC Board eliminated the OSA.  The OSA was disbanded by summary agenda vote at the Board’s May 17, 2022 meeting without substantive discussion and without providing any advance public notice of its intended action.  These actions are inconsistent with the “Trust through Transparency” initiatives the FDIC championed in recent years and are a significant and troubling departure from the FDIC’s historical practice of promoting open dialogue through the notice and comment process, irrespective of administration.  Furthermore, the FDIC’s decision to eliminate the OSA, only five months after its implementation, and reconstitute the SARC was effective immediately and did not afford the public any opportunity to supply  comments in advance.  The FDIC opened this comment period to solicit feedback from the public only after the change had taken effect.

Plainly stated, opening a public comment period following an effective date does not appear to be a reasonable attempt to encourage input from all affected sources and take such feedback into account, especially in the absence of exigent circumstances that warrant immediate agency action.  Nevertheless, the Associations strongly encourage the FDIC to reconsider its decision to eliminate the OSA.


Section 309(a) of the Riegle Community Development and Regulatory Improvement Act of 1994 (“Riegle Act”) mandates that the FDIC establish an “independent intra-agency appellate process” to review material supervisory determinations.  When Congress enacted the Riegle Act, it intended to protect the integrity of an intra-agency appeals process by expressly codifying safeguards to promote independent review and protect appellants from bias and retaliation by agency staff.  For example, the Riegle Act requires that the FDIC’s review 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.”  Additionally, the FDIC is required to ensure “(1) any appeal of a material supervisory determination . . .  is heard and decided expeditiously; and (2) appropriate safeguards exist for protecting the appellant from retaliation by agency examiners.”

In 1995, the FDIC’s Board of Directors adopted the Appeals Guidelines  to implement the Riegle Act and establish the SARC as an oversight body composed of members: (1) the FDIC’s Chairperson (as Chairperson of the SARC); (2) the Director of the Division of Supervision; (3) the Director of Compliance and Consumer Affairs; (4) the FDIC Ombudsman; and (5) the General Counsel.  However, in response to persistent criticisms that SARC’s composition and processes were not fair and impartial, and therefore did not comply with the Riegle Act’s requirements, the FDIC subsequently amended the Guidelines in 2004 to change the structure and composition of the SARC to consist of: (1) one of the FDIC’s three inside directors (to serve as the SARC Chairperson); (2) one deputy or special assistant to each of the other two inside directors; and (3) the General Counsel (serving as a nonvoting member of the SARC).  The FDIC also amended the Guidelines in 2017 to more clearly articulate the circumstances in which an insured depository institution could appeal a formal enforcement action.

The criticisms of the SARC process continued, however, and in 2019, the FDIC began exploring potential, additional improvements to the supervisory appeals process and hosted in-person listening sessions in each of the FDIC’s seven regions to solicit feedback on topics including: (1) perceived barriers to, or concerns about, resolving disagreements between bankers and the FDIC; (2) timeframes and procedures for pursuing reviews and appeals; (3) information publicly available on appeals and examination disagreements; and (4) composition of the SARC and opportunities to further enhance the independence of the appeals process.  In response to this feedback, and due to ongoing criticisms of the SARC, the FDIC published for comment a proposal to replace the SARC with the OSA as an independent, standalone office within the FDIC.  The overwhelming sentiment of the commenters – 86% of commenters, or 13 out of 15 commenters – supported the formation of the OSA to better promote independent supervisory reviews and bolster confidence in the process governing appeals of material supervisory determinations.  Based on the strong and nearly unified public feedback the FDIC received through its listening sessions and notice and comment, the agency ultimately retired the SARC in favor of the OSA.

To read full comment letter, click here.


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