Independent Regulatory Appeals Process

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

[Docket No. 94-23]

Independent Regulatory Appeals Process

Agency: Office of the Comptroller of the Currency, Treasury.

Action: Notice and request for comments.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is

requesting comments on its guidelines that permit national banks to

appeal certain OCC decisions and actions. This Action is required by

the Riegle Community Development and Regulatory Improvement Act of

1994. The OCC intends to use the comments in evaluating whether changes

to the proposed guidelines are appropriate.

DATES: Comments must be received by January 23, 1995.

ADDRESSES: Comments may be submitted to Docket Number 94-23,

Communications Division, Ninth Floor, Office of the Comptroller of the

Currency, 250 E Street, SW., Washington, DC 20219. Comments will be

available for inspection and photocopying at that address.

FOR FURTHER INFORMATION CONTACT: Heidi Thomas, Legislative Counsel,

Legislative and Regulatory Activities Division, 202-874-5090, or P.

Michael Yuenger, Office of the Chief National Bank Examiner, 202-874-

5350, Office of the Comptroller of the Currency.

SUPPLEMENTARY INFORMATION:

Background

Section 309(a) of the Riegle Community Development and Regulatory

Improvement Act of 1994, Pub. L. 103-325 (12 U.S.C. 4806) (the Act),

which was signed into law on September 23, 1994, requires the OCC, the

Office of Thrift Supervision, the Federal Deposit Insurance

Corporation, and the Federal Reserve Board (Federal banking agencies)

and the National Credit Union Administration to establish an

independent internal appellate process. This process must be available

to review material supervisory determinations made at insured

depository institutions or credit unions that the agency supervises.

Section 309(c) of the Act (12 U.S.C. 4806(c)) requires that each

Federal banking agency must provide public notice and opportunity for

comment on its proposed guidelines for this appellate process by

December 22, 1994, and establish this process by March 22, 1995.

The Act defines ``independent appellate process'' in section

309(f)(2) (12 U.S.C. 4806(f)(2)) as a review by an agency official who

does not directly or indirectly report to the agency official who made

the material supervisory determination under review. In addition, this

Act defines ``material supervisory determinations'' in section

309(f)(1) (12 U.S.C. 4806(f)(1)) to include determinations relating to

(1) examination ratings, (2) the adequacy of loan loss reserve

provisions, and (3) loan classifications on loans that are significant

to an institution. This definition expressly excludes determinations to

appoint a conservator or receiver for an insured depository institution

or a decision to take prompt corrective action pursuant to section 38

of the Federal Deposit Insurance Act (FDI Act) (12 U.S.C. 1831o).

In addition, section 309(g) (12 U.S.C. 4806(g)) expressly provides

that the Act's requirement to establish an appeals process does not

affect the authority of the banking agencies to take enforcement or

supervisory actions against an institution. Finally, section 309(b) (12

U.S.C. 4906(b)) of the Act requires that appeals be heard and decided

expeditiously and that appropriate safeguards exist for protecting the

appellant from retaliation by agency examiners.

Existing OCC Appeals Process

The OCC's existing procedures for national banks to appeal agency

decisions and actions were published in Banking Circular No. 272, dated

June 11, 1993. These procedures have been modified and clarified in the

proposed guidelines to be consistent with the requirements of the Act.

Until these guidelines are published in final form in the Federal

Register, the current OCC appeals policy as set forth in Banking

Circular No. 272 remains in effect. The OCC's appeals policy does not

supersede any existing appeals procedures available under current law.

The OCC's appeals process provides that a national bank may file

its appeal either with the District Administrator or Deputy Comptroller

of the OCC District in which the bank is headquartered (or the Deputy

Comptroller for the appropriate program in Washington, D.C. if the bank

is a multinational bank or under special supervision), or directly with

the Ombudsman. The proposed guidelines clarify that the term national

bank includes a Federal branch or agency of a foreign bank.

The District Administrator or Deputy Comptroller normally does not

directly or indirectly participate in making reviewable supervisory

decisions nor report directly or indirectly to the agency official who

made the reviewable decision. In addition, the national bank may always

file its appeal with the Ombudsman who is outside the bank supervision

area, reporting only to the Comptroller. Therefore, the OCC believes

that its appeals process complies with the Act's requirement that

appeals be heard by an agency official who does not report directly or

indirectly to the agency official who made the material supervisory

determination under review.

However, to further assure that the appeals process remains

completely independent, the OCC has added a provision to require the

District Administrator or Deputy Comptroller to transfer an appeal to

the Ombudsman if the District Administrator or Deputy Comptroller

directly or indirectly participated in making the decision under review

or reports directly or indirectly to the agency official who made the

decision under review. In addition, the OCC has added a provision to

require the Ombudsman to transfer an appeal to the Senior Deputy

Comptroller for Bank Supervision Policy if the Ombudsman should be

recused from reviewing the decision under appeal.

The OCC also is proposing to extend the period of time in which the

District Administrator, Deputy Comptroller, or Ombudsman must make a

decision on an appeal. Currently, the OCC's policy requires that the

District Administrator or the Deputy Comptroller, in the absence of any

extenuating circumstances, issue a written response within 20 calendar

days of the filing of an appeal, and that the Ombudsman issue a written

response within 30 calendar days of the filing of an appeal. In

addition, the Ombudsman must issue a written response to a second-tier

appeal, which is an appeal by a national bank of an appeal decision

made by a District Administrator or Deputy Comptroller, within 15

calendar days of the filing of that second-tier appeal. The OCC is

proposing to extend the time period for deciding all first-tier appeals

to 45 days, and all second-tier appeals to 30 days. Based on the OCC's

current experience with the appeals process, it has found that some

additional time may be necessary. The OCC believes that the time

periods in the proposed guidelines complies with the Act's requirement

that an appeal be heard and decided expeditiously.

The Act also requires that the appeals process contain appropriate

safeguards for protecting the appellant from retaliation by agency

examiners. Currently, the OCC takes steps to ensure that banks are not

unfairly treated because of their appeal, although these steps are not

part of the OCC's written appeals process. Specifically, the Ombudsman

makes periodic informal inquiries after a decision on an appeal is made

to determine whether the bank believes the OCC has taken action against

it in retaliation for its appeal. If a bank indicates that such

retaliatory action has occurred, the Ombudsman initiates an

investigation.

To ensure that these procedures are followed for each appeal, the

OCC proposes to include the Ombudsman's follow-up-inquiries in its

guidelines. Specifically, the OCC proposes that the Ombudsman contact

the appellant bank to inquire whether the bank believes that OCC

examiners have taken actions against it in retaliation for its appeal

within (1) six months after the date the Ombudsman, Deputy

Administrator or Deputy Comptroller issues a final written response to

an appeal, and (2) six months after the date of completion of the first

examination following an appeal. In addition, national banks that

believe they are the subject of retaliation because of their appeal

may, at any time, seek redress with the Ombudsman.

Finally, the OCC proposes to change its definition of appealable

matters to expressly comply with the definition of ``material

supervisory determinations'' as provided in section 309(f)(1) of the

Act (12 U.S.C. 4806(f)(1)). The OCC's current process permits national

banks to seek review of all agency decisions and actions except those

involving the appointment of receivers and conservators. Also expressly

excluded are preliminary examination conclusions communicated to the

national bank prior to the issuance of either a Final Report of

Examination or other written communication from the OCC. The OCC

believes that, until these preliminary conclusions become final, they

are not ``material supervisory determinations'' for purposes of the

appellate procedures. Also, consistent with the Act, the OCC proposes

to continue to exclude enforcement-related actions or decisions from

actions covered by the guidelines. The OCC proposes to clarify that

enforcement-related actions include decisions to take prompt corrective

action pursuant to section 38 of the FDI Act (12 U.S.C. 1831o) and,

thus, are not appealable under these guidelines.

To be consistent with the Act, the OCC proposes to add the

definition of ``material supervisory determination'' to its discussion

of appealable matters. The OCC appeals policy still includes decisions

and actions in addition to those specifically identified by the Act as

material supervisory determinations, unless otherwise excluded.

Issues for Comment

The OCC requests comments on all aspects of its appeals process. In

particular, the OCC requests comments on the following issues:

1. Do the guidelines adequately provide independence in the appeals

process?

2. Do the guidelines adequately provide that appeals are heard and

decided expeditiously?

3. Do the guidelines adequately protect appellant banks from

retaliation by OCC examiners?

4. Is the scope of appealable matters appropriate?

5. To what extent should the Ombudsman be bound by existing OCC

policies?

National Bank Appeals Process

The following is the OCC's Proposed Appeals Process:

I. Policy

The OCC is responsible for fostering the safety and soundness of

the national banking system, monitoring, and enforcing national banks'

compliance with laws, and encouraging competitiveness, integrity, and

stability of financial services. In fulfilling this mission, it is the

OCC's policy to maintain open and ongoing communication with the

institutions it supervises and to foster the fair and equitable

administration of the supervisory process.

If a disagreement arises during the supervisory process, the OCC

will resolve the dispute fairly and expeditiously in an informal,

amicable manner. If disagreements cannot be resolved through informal

discussions, national banks and Federal branches and agencies of

foreign banks (collectively referred to as ``national banks'' for

purposes of these guidelines) are encouraged, and the examiner involved

in the dispute should specifically encourage the national bank, to seek

a further review of the OCC decisions or actions that are in dispute.

These guidelines establish a mechanism through which a national

bank can seek such a review. A critical element in this appeals process

is the Ombudsman. The Ombudsman is outside the bank supervision area

and reports directly to the Comptroller of the Currency. With the prior

consent of the Comptroller, the Ombudsman may supersede any agency

decision or action during the resolution of an appealable matter.

The procedures established in these guidelines provide national

banks a fair and expeditious review of agency decisions and actions

while ensuring that no one is disadvantaged by the filing of an appeal.

If a national bank has a question as to whether it should make use of

this appeal authority, it should contact the Ombudsman.

II. Procedures

A. Filing An Appeal

A national bank may seek review of appealable matters by filing an

appeal with either its immediate supervisory office or with the OCC's

Ombudsman. All communications with the Ombudsman may be sent to 1000

Louisiana Street, Suite 950, Houston, Texas 77002-5008. The choice of

where to file is a matter within the sole discretion of the bank,

except as indicated below; all appealable matters can be received in

either location. However, in cases where the District Administrator or

Deputy Comptroller directly or indirectly participated in making the

decision under review or directly or indirectly reports to the agency

official who made the decision under review, the District Administrator

or Deputy Comptroller must transfer the appeal to the Ombudsman. In

addition, in cases where the Ombudsman should be recused from reviewing

the decision under appeal, the Ombudsman shall transfer the appeal to

the Senior Deputy Comptroller for Bank Supervision Policy in the OCC's

Washington DC Office. The procedures for filing an appeal under the two

options are outlined below.

1. Supervisory Office Appeals. If a disagreement concerning an OCC

supervisory decision or action cannot be resolved informally, a

national bank may file an appeal with its immediate supervisory office.

Community banks and regional banks seeking appeal under this option

should file such appeals with the District Administrator or Deputy

Comptroller of the OCC District in which the bank is headquartered.

Banks in the Multinational Banking or Special Supervision programs

using this option should file appeals with the Deputy Comptroller for

the program in the Washington Office. In cases where the District

Administrator or Deputy Comptroller directly or indirectly participated

in making the decision under review or directly or indirectly reports

to the agency official who made the decision under review, the District

Administrator or Deputy Comptroller must transfer the appeal to the

Ombudsman after advising the appellant.

An appellant national banks must submit information in writing

fully describing the matter in dispute and setting forth its basis for

requesting an appeal. Upon receipt of an appeal, the appropriate

District Administrator or Deputy Comptroller, or a designee who has not

directly or indirectly participated in making the decision in dispute

nor is directly or indirectly responsible to the agency official who

made the decision under review, will contact the OCC employee(s)

involved in the matter under appeal. The OCC employee(s) shall submit

written or oral information concerning the basis of the appeal. If

requested by a senior official of the national bank filing the appeal,

the appropriate District Administrator or Deputy Comptroller shall

arrange a meeting or a telephone call to more fully discuss the appeal

and related issues.

In the absence of any extenuating circumstances, the appropriate

District Administrator or Deputy Comptroller shall issue a written

response within 45 calendar days of the filing of the appeal.

Immediately after the response is issued, the District Administrator or

Deputy Comptroller shall forward to the Ombudsman copies of all

relevant materials considered in the preparation of the response,

including all written submissions by the bank.

If the national bank disagrees with the response from the District

Administrator or Deputy Comptroller, a senior official of the bank may

further appeal the matter to the Ombudsman. The bank must file written

notice of this second-tier appeal within 15 calendar days of receiving

the response from the appropriate District Administrator or Deputy

Comptroller.

After receipt of a second-tier appeal, the Ombudsman shall review

all materials considered by the appropriate District Administrator or

Deputy Comptroller in the preparation of the initial response. The

Ombudsman shall contact the national bank to ensure that the OCC is in

possession of all relevant materials. If requested by either OCC

management involved in the dispute or a senior official of the national

bank filing the appeal, the Ombudsman shall arrange a meeting or a

telephone call to more fully discuss the appeal and related issues. In

the absence of any extenuating circumstances, the Ombudsman shall issue

a written response to the second-tier appeal within 30 calendar days of

the filing of that appeal.

2. Appeals to the Ombudsman When disagreements concerning OCC

supervisory decisions and actions cannot be resolved informally and a

national bank chooses not to file an appeal with its immediate

supervisory office, a national bank may file an appeal directly with

the Ombudsman. In cases where the Ombudsman should be recused from

reviewing the decision under appeal, the Ombudsman shall transfer the

appeal to the Senior Deputy Comptroller for Bank Supervision Policy in

the OCC's Washington DC office. In such cases, the procedures outlined

below will apply.

National banks filing appeals with the Ombudsman must submit

information in writing fully describing the matter in dispute. After

receipt of an appeal, the Ombudsman shall contact the OCC management

official involved in the dispute. That management official shall submit

written materials and relevant OCC documents pertaining to the bases of

the appeal within 10 calendar days of the notice from the Ombudsman.

The Ombudsman shall contact the national bank to ensure that the OCC is

in possession of all relevant materials. If requested by either OCC

management involved in the dispute or a senior official of the national

bank filing the appeal, the Ombudsman shall arrange a meeting or a

telephone call to more fully discuss the appeal and related issues. In

the absence of any extenuating circumstances, the Ombudsman shall issue

a written response to the appeal within 45 calendar days of the filing

of the appeal by a national bank.

B. Follow-up by Ombudsman

After the Ombudsman receives a decision on an appeal, the Ombudsman

shall contact every appellant bank to inquire whether the bank believes

OCC examiners have taken actions against the bank in retaliation for

its appeal. The Ombudsman shall make these contacts (1) six months

after the date the Ombudsman, Deputy Administrator or Deputy

Comptroller issues a final written response to an appeal, and (2) six

months after the date of completion of the first examination of the

appellant bank following its appeal. A national bank may, of course,

contact the Ombudsman at any time during or after the appeal if the

bank reasonably believes that an OCC examiner is taking action against

it in retaliation for its appeal. Upon identifying or learning of any

possible retaliatory actions, the Ombudsman shall investigate the

complaint; such investigations must be completed within 30 days. If the

Ombudsman determines that retaliation has occurred, the Ombudsman shall

forward the complaint to the District Administrator, Deputy

Comptroller, or Inspector General for appropriate action.

C. Appealable Matters

Except as otherwise provided, a national bank may seek a review of

any agency decision or action, including a material supervisory

determination. A material supervisory determination includes a

determination relating to:

Examination ratings;

The adequacy of loan loss reserve provisions; and

Loan classifications on loans that are significant to an

institution.

A national bank may not appeal:

Appointments of receivers and conservators;

Preliminary examination conclusions communicated to the

national bank prior to the issuance of either a final Report of

Examination or other written communication from the OCC; and

Enforcement-related actions or decisions, including

decisions to take prompt corrective action pursuant to section 38 of

the Federal Deposit Insurance Act (12 U.S.C. Sec. 1831o).

An enforcement-related action or decision commences, and therefore

becomes unappealable, when the national bank receives notice from the

OCC indicating its intention to pursue available remedies under

applicable statutes or published enforcement-related policies of the

OCC. Such policies include OCC's Policy for Corrective Action (PPM

5310-3)(REV), Civil Money Penalty Policy (PPM 5000-7)(REV), and

Securities Enforcement Policy (PPM 5310-5). These policies are

available on request from the OCC's Communications Division, 250 E.

Street, SW., Washington DC 20219-0001, 202-874-4700. For purposes of

these guidelines only, remarks in a Report of Examination do not

constitute notice of intent to pursue enforcement remedies.

The appeals process established by these guidelines does not

supersede any existing appeals procedures available under current law.

Matters which are subject to an existing appeals process designed

specifically for the issue in dispute, such as re-review of Shared

National Credit findings (Banking Circular 189), and reconsideration of

decisions on corporate applications (12 CFR 5.13(d)), are appealable to

the Ombudsman when the agency decision is final under the specifically

designed procedures.

III. Effect of Filing An Appeal

As a general rule, the filing of an appeal with either the national

bank's immediate supervisory office or with the Ombudsman serves to

stay all agency decisions and actions until the appeal is resolved. In

the appropriate circumstances, however, the Ombudsman may put the

disputed agency decision or action into effect while the appeal is

still pending.

Dated: December 19, 1994.

Eugene A. Ludwig

Comptroller of the Currency.

[FR Doc. 94-31545 Filed 12-21-94; 8:45 am]

BILLING CODE 4810-33-P