FDIC Adopts Rule on the Role of Supervisory Guidance

This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents.

Rules and Regulations

Federal Register

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Vol. 86, No. 39

Tuesday, March 2, 2021

1 Regulations are commonly referred to as

legislative rules because regulations have the ‘‘force

and effect of law.’’ Perez v. Mortgage Bankers

Association, 575 U.S. 92, 96 (2015) (citations

omitted).

2 See Chrysler v. Brown, 441 U.S. 281, 302 (1979)

(quoting the Attorney General’s Manual on the

Administrative Procedure Act at 30 n.3 (1947)

(Attorney General’s Manual) and discussing the

distinctions between regulations and general

statements of policy, of which supervisory guidance

is one form).

3 See https://www.fdic.gov/news/financial-

institution-letters/2018/fil18049.html.

4 While supervisory guidance offers guidance to

the public on the FDIC’s approach to supervision

under statutes and regulations and safe and sound

practices, the issuance of guidance is discretionary

and is not a prerequisite to the FDIC’s exercise of

its statutory and regulatory authorities. This point

reflects the fact that statutes and legislative rules,

not statements of policy, set legal requirements.

5 The Administrative Conference of the United

States (ACUS) has recognized the important role of

guidance documents and has stated that guidance

can ‘‘make agency decision-making more

predictable and uniform and shield regulated

parties from unequal treatment, unnecessary costs,

and unnecessary risk, while promoting compliance

with the law.’’ ACUS, Recommendation 2017–5,

Agency Guidance Through Policy Statements at 2

(adopted December 14, 2017), available at https://

www.acus.gov/recommendation/agency-guidance-

through-policy-statements

‘make agency decision-making more

predictable and uniform and shield regulated

parties from unequal treatment, unnecessary costs,

and unnecessary risk, while promoting compliance

with the law.’’ ACUS, Recommendation 2017–5,

Agency Guidance Through Policy Statements at 2

(adopted December 14, 2017), available at https://

www.acus.gov/recommendation/agency-guidance-

through-policy-statements. ACUS also suggests that

‘‘policy statements are generally better [than

legislative rules] for dealing with conditions of

uncertainty and often for making agency policy

accessible.’’ Id. ACUS’s reference to ‘‘policy

statements’’ refers to the statutory text of the APA,

which provides that notice and comment is not

required for ‘‘general statements of policy.’’ The

phrase ‘‘general statements of policy’’ has

commonly been viewed by courts, agencies, and

administrative law commentators as including a

wide range of agency issuances, including guidance

documents.

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 302

RIN 3064–AF32

Role of Supervisory Guidance

AGENCY: Federal Deposit Insurance

Corporation (FDIC).

ACTION: Final rule.

SUMMARY: The FDIC is adopting a final

rule that codifies the Interagency

Statement Clarifying the Role of

Supervisory Guidance, issued by the

FDIC, Board of Governors of the Federal

Reserve System (Board), Office of the

Comptroller of the Currency, Treasury

(OCC), National Credit Union

Administration (NCUA), and Bureau of

Consumer Financial Protection (Bureau)

(collectively, the agencies) on

September 11, 2018 (2018 Statement).

By codifying the 2018 Statement, with

amendments, the final rule confirms

that the FDIC will continue to follow

and respect the limits of administrative

law in carrying out its supervisory

responsibilities. The 2018 Statement

reiterated well-established law by

stating that, unlike a law or regulation,

supervisory guidance does not have the

force and effect of law

, 2018 (2018 Statement).

By codifying the 2018 Statement, with

amendments, the final rule confirms

that the FDIC will continue to follow

and respect the limits of administrative

law in carrying out its supervisory

responsibilities. The 2018 Statement

reiterated well-established law by

stating that, unlike a law or regulation,

supervisory guidance does not have the

force and effect of law. As such,

supervisory guidance does not create

binding legal obligations for the public.

Because it is incorporated into the final

rule, the 2018 Statement, as amended, is

binding on the FDIC. The final rule

adopts the rule as proposed without

substantive changes.

DATES: The final rule is effective on

April 1, 2021.

FOR FURTHER INFORMATION CONTACT: Rae-

Ann Miller, Senior Deputy Director,

(202) 898–3898; Karen Jones Currie,

Senior Examination Specialist, (202)

898–3981; Supervisory Examinations

Branch, Division of Risk Management

and Supervision; Luke H. Brown,

Associate Director, (202) 898–3842;

David Friedman, Senior Policy Analyst,

(202) 898–7168, Supervisory Policy,

Division of Depositor and Consumer

Protection; William Piervincenzi,

Supervisory Counsel, (202) 898–6957;

Kathryn J. Marks, Counsel, (202) 898–

3896; Jennifer M. Jones, Counsel, (202)

898–6768, jennjones@fdic.gov,

Supervision and Legislation Branch,

Legal Division, Federal Deposit

Insurance Corporation, 550 17th Street

NW, Washington, DC 20429. For the

hearing impaired only,

Telecommunication Device for the Deaf

(TDD), (800) 925–4618.

SUPPLEMENTARY INFORMATION:

I. Background

The FDIC recognizes the important

distinction between issuances that serve

to implement acts of Congress (known

as ‘‘regulations’’ or ‘‘legislative rules’’)

and non-binding supervisory guidance

documents.1 Regulations create binding

legal obligations

429. For the

hearing impaired only,

Telecommunication Device for the Deaf

(TDD), (800) 925–4618.

SUPPLEMENTARY INFORMATION:

I. Background

The FDIC recognizes the important

distinction between issuances that serve

to implement acts of Congress (known

as ‘‘regulations’’ or ‘‘legislative rules’’)

and non-binding supervisory guidance

documents.1 Regulations create binding

legal obligations. Supervisory guidance

is issued by an agency to ‘‘advise the

public prospectively of the manner in

which the agency proposes to exercise

a discretionary power’’ and does not

create binding legal obligations.2

In recognition of the important

distinction between rules and guidance,

on September 11, 2018, the agencies

issued the Interagency Statement

Clarifying the Role of Supervisory

Guidance (2018 Statement) to explain

the role of supervisory guidance and

describe the agencies’ approach to

supervisory guidance.3 As noted in the

2018 Statement, the agencies issue

various types of supervisory guidance to

their respective supervised institutions,

including, but not limited to,

interagency statements, advisories,

bulletins, policy statements, questions

and answers, and frequently asked

questions. Supervisory guidance

outlines the agencies’ supervisory

expectations or priorities and articulates

the agencies’ general views regarding

practices for a given subject area.

Supervisory guidance often provides

examples of practices that mitigate risks,

or that the agencies generally consider

to be consistent with safety-and-

soundness standards or other applicable

laws and regulations, including those

designed to protect consumers.4 The

agencies noted in the 2018 Statement

that supervised institutions at times

request supervisory guidance and that

guidance is important to provide clarity

to these institutions, as well as

supervisory staff, in a transparent way

that helps to ensure consistency in the

supervisory approach.5

The 2018 Statement restated existing

law and reaffirmed the agencies’

d to protect consumers.4 The

agencies noted in the 2018 Statement

that supervised institutions at times

request supervisory guidance and that

guidance is important to provide clarity

to these institutions, as well as

supervisory staff, in a transparent way

that helps to ensure consistency in the

supervisory approach.5

The 2018 Statement restated existing

law and reaffirmed the agencies’

understanding that supervisory

guidance does not create binding,

enforceable legal obligations. The 2018

Statement reaffirmed that the agencies

do not issue supervisory criticisms for

‘‘violations’’ of supervisory guidance

and described the appropriate use of

supervisory guidance by the agencies. In

the 2018 Statement, the agencies also

expressed their intention to (1) limit the

use of numerical thresholds in

guidance; (2) reduce the issuance of

multiple supervisory guidance

documents on the same topic; (3)

continue efforts to make the role of

supervisory guidance clear in

communications to examiners and

supervised institutions; and (4)

encourage supervised institutions to

discuss their concerns about

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6 5 U.S.C. 553(e).

7 See Petition for Rulemaking on the Role of

Supervisory Guidance, available at https://bpi.com/

wp-content/uploads/2018/11/BPI_PFR_on_Role_of_

Supervisory_Guidance_Federal_Reserve.pdf. The

Petitioners did not submit a petition to the NCUA,

which has no supervisory authority over the

financial institutions that are represented by

Petitioners. The NCUA chose to join the Proposed

Rule on its own initiative.

8 85 FR 70512 (November 5, 2020)

ervisory Guidance, available at https://bpi.com/

wp-content/uploads/2018/11/BPI_PFR_on_Role_of_

Supervisory_Guidance_Federal_Reserve.pdf. The

Petitioners did not submit a petition to the NCUA,

which has no supervisory authority over the

financial institutions that are represented by

Petitioners. The NCUA chose to join the Proposed

Rule on its own initiative.

8 85 FR 70512 (November 5, 2020).

9 The agencies use different terms to refer to

supervisory actions that are similar to MRAs and

Matters Requiring Immediate Attention (MRIAs),

including matters requiring board attention

(MRBAs), documents of resolution, and supervisory

recommendations.

10 For the sake of clarification, one source of law

among many that can serve as a basis for a

supervisory criticism is the Interagency Guidelines

Establishing Standards for Safety and Soundness,

see 12 CFR part 30, appendix A, 12 CFR part. 208,

appendix D–1, and 12 CFR part 364, appendix A.

These Interagency Guidelines were issued using

notice and comment and pursuant to express

statutory authority in 12 U.S.C. 1831p–1(d)(1) to

adopt safety and soundness standards either by

‘‘regulation or guideline.’’

11 The 2018 Statement contains the following

sentence: ‘‘Examiners will not criticize a supervised

financial institution for a ‘violation’ of supervisory

guidance.’’ 2018 Statement at 2. As revised in the

Proposed Rule, this sentence read as follows:

‘‘Examiners will not criticize (including through the

issuance of matters requiring attention, matters

requiring immediate attention, matters requiring

board attention, documents of resolution, and

supervisory recommendations) a supervised

financial institution for, and agencies will not issue

an enforcement action on the basis of, a ‘violation’

of or ‘non-compliance’ with supervisory guidance.’’

Proposed Rule (emphasis added)

ing through the

issuance of matters requiring attention, matters

requiring immediate attention, matters requiring

board attention, documents of resolution, and

supervisory recommendations) a supervised

financial institution for, and agencies will not issue

an enforcement action on the basis of, a ‘violation’

of or ‘non-compliance’ with supervisory guidance.’’

Proposed Rule (emphasis added). As discussed

infra in footnote 13, the Proposed Rule also

removed the sentences in the 2018 Statement that

referred to ‘‘citation,’’ which the Petition suggested

had been confusing. These sentences were also

removed to clarify that the focus of the Proposed

Rule related to the use of guidance, not the

standards for MRAs.

12 The Petition asserted that the federal banking

agencies rely on 12 U.S.C. 1818(b)(1) when issuing

MRAs based on safety-and-soundness matters.

Through statutory examination and reporting

authorities, Congress has conferred upon the

agencies the authority to exercise visitorial powers

with respect to supervised institutions. The

Supreme Court has indicated support for a broad

reading of the agencies’ visitorial powers. See, e.g.,

Cuomo v. Clearing House Assn L.L.C., 557 U.S. 519

(2009); United States v. Gaubert, 499 U.S. 315

(1991); and United States v. Philadelphia Nat.

Bank, 374 U.S. 321 (1963). The visitorial powers

facilitate early identification of supervisory

concerns that may not rise to a violation of law,

unsafe or unsound banking practice, or breach of

fiduciary duty under 12 U.S.C. 1818.

13 The following sentences from the 2018

Statement were not present in the Proposed Rule:

‘‘Rather, any citations will be for violations of law,

regulation, or non-compliance with enforcement

orders or other enforceable conditions. During

supervisory guidance with their agency

contact

a violation of law,

unsafe or unsound banking practice, or breach of

fiduciary duty under 12 U.S.C. 1818.

13 The following sentences from the 2018

Statement were not present in the Proposed Rule:

‘‘Rather, any citations will be for violations of law,

regulation, or non-compliance with enforcement

orders or other enforceable conditions. During

supervisory guidance with their agency

contact.

On November 5, 2018, the OCC,

Board, FDIC, and Bureau each received

a petition for a rulemaking (Petition), as

permitted under the Administrative

Procedure Act (APA),6 requesting that

the agencies codify the 2018 Statement.7

The Petition argued that a rule on

guidance is necessary to bind future

agency leadership and staff to the 2018

Statement’s terms. The Petition also

suggested there are ambiguities in the

2018 Statement concerning how

supervisory guidance is used in

connection with matters requiring

attention, matters requiring immediate

attention (collectively, MRAs), as well

as in connection with other supervisory

actions that should be clarified through

a rulemaking. Finally, the Petition

called for the rulemaking to implement

changes in the agencies’ standards for

issuing MRAs. Specifically, the Petition

requested that the agencies limit the role

of MRAs to addressing circumstances in

which there is a violation of a statute,

regulation, or order, or demonstrably

unsafe or unsound practices.

II. The Proposed Rule and Comments

Received

On November 5, 2020, the agencies

issued a proposed rule (Proposed Rule

or Proposal) that would have codified

the 2018 Statement, with clarifying

changes, as an appendix to proposed

rule text.8 The Proposed Rule would

have superseded the 2018 Statement.

The rule text would have provided that

an amended version of the 2018

Statement is binding on each respective

agency

Comments

Received

On November 5, 2020, the agencies

issued a proposed rule (Proposed Rule

or Proposal) that would have codified

the 2018 Statement, with clarifying

changes, as an appendix to proposed

rule text.8 The Proposed Rule would

have superseded the 2018 Statement.

The rule text would have provided that

an amended version of the 2018

Statement is binding on each respective

agency.

Clarification of the 2018 Statement

The Petition expressed support for the

2018 Statement and acknowledged that

it addresses many issues of concern for

the Petitioners relating to the use of

supervisory guidance. The Petition

expressed concern, however, that the

2018 Statement’s reference to not basing

‘‘criticisms’’ on violations of

supervisory guidance has led to

confusion about whether MRAs are

covered by the 2018 Statement.

Accordingly, the agencies proposed to

clarify in the Proposed Rule that the

term ‘‘criticize’’ includes the issuance of

MRAs and other supervisory criticisms,

including those communicated through

matters requiring board attention,

documents of resolution, and

supervisory recommendations

(collectively, supervisory criticisms).9

As such, the agencies reiterated that

examiners will not base supervisory

criticisms on a ‘‘violation’’ of or ‘‘non-

compliance’’ with supervisory

guidance.10 The agencies noted that, in

some situations, examiners may

reference (including in writing)

supervisory guidance to provide

examples of safe and sound conduct,

appropriate consumer protection and

risk management practices, and other

actions for addressing compliance with

laws or regulations. The agencies also

reiterated that they will not issue an

enforcement action on the basis of a

‘‘violation’’ of or ‘‘non-compliance’’

with supervisory guidance. The

Proposed Rule reflected these

clarifications.11

The Petition requested further that

these supervisory criticisms should not

include ‘‘generic’’ or ‘‘conclusory’’

references to safety and soundness

ce with

laws or regulations. The agencies also

reiterated that they will not issue an

enforcement action on the basis of a

‘‘violation’’ of or ‘‘non-compliance’’

with supervisory guidance. The

Proposed Rule reflected these

clarifications.11

The Petition requested further that

these supervisory criticisms should not

include ‘‘generic’’ or ‘‘conclusory’’

references to safety and soundness. The

agencies agreed that supervisory

criticisms should continue to be specific

as to practices, operations, financial

conditions, or other matters that could

have a negative effect on the safety and

soundness of the financial institution,

could cause consumer harm, or could

cause violations of laws, regulations,

final agency orders, or other legally

enforceable conditions. Accordingly, the

agencies included language reflecting

this practice in the Proposed Rule.

The Petition also suggested that

MRAs, as well as memoranda of

understanding, examination

downgrades, and any other formal

examination mandate or sanction,

should be based only on a violation of

a statute, regulation, or order, including

a ‘‘demonstrably unsafe or unsound

practice.’’ 12 As noted in the Proposed

Rule, examiners all take steps to identify

deficient practices before they rise to

violations of law or regulation or before

they constitute unsafe or unsound

banking practices. The agencies stated

that they continue to believe that early

identification of deficient practices

serves the interest of the public and of

supervised institutions. Early

identification protects the safety and

soundness of banks, promotes consumer

protection, and reduces the costs and

risk of deterioration of financial

condition from deficient practices

resulting in violations of laws or

regulations, unsafe or unsound

conditions, or unsafe or unsound

banking practices. The Proposed Rule

also noted that the agencies have

different supervisory processes,

including for issuing supervisory

criticisms

dness of banks, promotes consumer

protection, and reduces the costs and

risk of deterioration of financial

condition from deficient practices

resulting in violations of laws or

regulations, unsafe or unsound

conditions, or unsafe or unsound

banking practices. The Proposed Rule

also noted that the agencies have

different supervisory processes,

including for issuing supervisory

criticisms. For these reasons, the

agencies did not propose revisions to

their respective supervisory practices

relating to supervisory criticisms.

The agencies also noted that the 2018

Statement was intended to focus on the

appropriate use of supervisory guidance

in the supervisory process, rather than

the standards for supervisory criticisms.

To address any confusion concerning

the scope of the 2018 Statement, the

Proposed Rule removed two sentences

from the 2018 Statement concerning

grounds for ‘‘citations’’ and the

handling of deficiencies that do not

constitute violations of law.13

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examinations and other supervisory activities,

examiners may identify unsafe or unsound

practices or other deficiencies in risk management,

including compliance risk management, or other

areas that do not constitute violations of law or

regulation.’’ 2018 Statement at 2. The agencies did

not intend these deletions to indicate a change in

supervisory policy.

14 Of the comments received, some comments

were not submitted to all agencies, and some

comments were identical. Note that this total

excludes comments that were directed at an

unrelated rulemaking by the Financial Crimes

Enforcement Network of the Department of the

Treasury (FinCEN). This final rule does not

specifically discuss those comments that are only

potentially relevant to other agencies

he comments received, some comments

were not submitted to all agencies, and some

comments were identical. Note that this total

excludes comments that were directed at an

unrelated rulemaking by the Financial Crimes

Enforcement Network of the Department of the

Treasury (FinCEN). This final rule does not

specifically discuss those comments that are only

potentially relevant to other agencies.

15 This final rule does not specifically discuss

those comments that are only potentially relevant

to other agencies.

16 The Federal banking agencies are the OCC,

Board, and FDIC. 12 U.S.C. 1813.

Comments on the Proposed Rule

A. Overview

The five agencies received

approximately 30 unique comments

concerning the Proposed Rule.14 The

FDIC discusses below those comments

that are potentially relevant to the

FDIC.15 Commenters representing trade

associations for banking institutions and

other businesses, state bankers’

associations, individual financial

institutions, and one member of

Congress expressed general support for

the proposed rule. These commenters

supported codification of the 2018

Statement and the reiteration by the

agencies that guidance does not have

the force of law and cannot give rise to

binding, enforceable legal obligations.

One of these commenters stated that the

Proposal would serve the interests of

consumers and competition by

clarifying the law for institutions and

potentially removing ambiguities that

could deter the development of

innovative products that serve

consumers and business clients, without

uncertainty regarding potential

regulatory consequences. These

commenters expressed strong support as

well for the clarification in the Proposed

Rule that the agencies will not criticize,

including through the issuance of

‘‘matters requiring attention,’’ a

supervised financial institution for a

‘‘violation’’ of, or ‘‘non-compliance’’

with, supervisory guidance

d business clients, without

uncertainty regarding potential

regulatory consequences. These

commenters expressed strong support as

well for the clarification in the Proposed

Rule that the agencies will not criticize,

including through the issuance of

‘‘matters requiring attention,’’ a

supervised financial institution for a

‘‘violation’’ of, or ‘‘non-compliance’’

with, supervisory guidance.

One commenter agreed with the

agencies that supervisory criticisms

should not be limited to violation of

statutes, regulations, or orders,

including a ‘‘demonstrable unsafe or

unsound practice’’ and that supervisory

guidance remains a beneficial tool to

communicate supervisory expectations

to the industry. The commenter stated

that the proactive identification of

supervisory criticism or deficiencies

that do not constitute violations of law

facilitates forward-looking supervision,

which helps address problems before

they warrant a formal enforcement

action. The commenter noted as well

that supervisory guidance provides

important insight to the industry and

ensures consistency in the supervisory

approach and that supervised

institutions frequently request

supervisory guidance. The commenter

observed that the COVID–19 pandemic

has amplified the requests for

supervisory guidance and interpretation

and that it is apparent institutions want

clarity and guidance from regulators.

Two commenters, both public interest

advocacy groups, opposed the proposed

rule, suggesting that codifying the 2018

Statement may undermine the

important role that supervisory

guidance can play by informing

supervisory criticism, rather than

merely clarifying that it will not serve

as the basis for enforcement actions.

One commenter stated that it is essential

for agencies to have the prophylactic

authority to base criticisms on

imprudent bank practices that may not

yet have ripened into violations of law

or significant safety and soundness

concerns

pervisory

guidance can play by informing

supervisory criticism, rather than

merely clarifying that it will not serve

as the basis for enforcement actions.

One commenter stated that it is essential

for agencies to have the prophylactic

authority to base criticisms on

imprudent bank practices that may not

yet have ripened into violations of law

or significant safety and soundness

concerns. The commenter stated that

this is particularly important with

respect to large banks, where delay in

addressing concerns could lead to a

broader crisis. One commenter stated

that the agencies have not explained the

benefits that would result from the rule

or demonstrated how the rule will

promote safety and soundness or

consumer protection. The commenter

argued that supervision is different from

other forms of regulation and requires

supervisory discretion, which could be

constrained by the rule. One of these

commenters argued that the Proposal

would send a signal that banking

institutions have wider discretion to

ignore supervisory guidance.

B. Scope of Rule

Several industry commenters

requested that the Proposed Rule cover

interpretive rules and clarify that

interpretive rules do not have the force

and effect of law. One commenter stated

that the agencies should clarify whether

they believe that interpretive rules can

be binding. The commenter argued that,

under established legal principles,

interpretive rules can be binding on the

agency that issues them but not on the

public. Some commenters suggested

that the agencies follow ACUS

recommendations for issuing

interpretive rules and that the agencies

should clarify when particular guidance

documents are (or are not) interpretive

rules and allow the public to petition to

change an interpretation. A number of

commenters requested that the agencies

expand the statement to address the

standards that apply to MRAs and other

supervisory criticisms, a suggestion

made in the Petition.

C

s for issuing

interpretive rules and that the agencies

should clarify when particular guidance

documents are (or are not) interpretive

rules and allow the public to petition to

change an interpretation. A number of

commenters requested that the agencies

expand the statement to address the

standards that apply to MRAs and other

supervisory criticisms, a suggestion

made in the Petition.

C. Role of Guidance Documents

Several commenters recommended

that the agencies clarify that the

practices described in supervisory

guidance are merely examples of

conduct that may be consistent with

statutory and regulatory compliance, not

expectations that may form the basis for

supervisory criticism. One commenter

suggested that the agencies state that

when agencies offer examples of safe

and sound conduct, compliance with

consumer protection standards,

appropriate risk management practices,

or acceptable practices through

supervisory guidance or interpretive

rules, the agencies will treat adherence

to practices outlined in that supervisory

guidance or interpretive rule as a safe

harbor from supervisory criticism. One

commenter also requested that the

agencies make clear that guidance that

goes through public comment, as well as

any examples used in guidance, is not

binding. The commenter also requested

that the agencies affirm that they will

apply statutory factors while processing

applications.

One commenter argued that guidance

provides valuable information to

supervisors about how their discretion

should be exercised and therefore plays

an important role in supervision. As an

example, according to this commenter,

12 U.S.C. 1831p–1 and 12 U.S.C. 1818

recognize the discretionary power

conferred on the Federal banking

agencies 16 which is separate from the

power to issue regulations

commenter argued that guidance

provides valuable information to

supervisors about how their discretion

should be exercised and therefore plays

an important role in supervision. As an

example, according to this commenter,

12 U.S.C. 1831p–1 and 12 U.S.C. 1818

recognize the discretionary power

conferred on the Federal banking

agencies 16 which is separate from the

power to issue regulations. The

commenter noted that, pursuant to these

statutes, regulators may issue cease and

desist orders based on reasonable cause

to believe that an institution has

engaged, is engaging, or is about to

engage in an unsafe and unsound

practice, separately and apart from

whether the institution has technically

violated a law or regulation. The

commenter added that Congress

entrusted the Federal banking agencies

with the power to determine whether

practices are unsafe and unsound and

attempt to halt such practices through

supervision, even if a specific case may

not constitute a violation of a written

law or regulation.

D. Supervisory Criticisms

Several commenters addressed

supervisory criticisms and how they

relate to guidance. These commenters

suggested that supervisory criticisms

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17 The FDIC does not issue MRAs or MRIAs.

Rather, the FDIC issues MRBAs, which are a subset

of supervisory recommendations. See Statement of

the FDIC Board of Directors on the Development

and Communication of Supervisory

Recommendations available at https://

www.fdic.gov/about/governance/

recommendations.html.

should be specific as to practices,

operations, financial conditions, or

other matters that could have a negative

effect

Rather, the FDIC issues MRBAs, which are a subset

of supervisory recommendations. See Statement of

the FDIC Board of Directors on the Development

and Communication of Supervisory

Recommendations available at https://

www.fdic.gov/about/governance/

recommendations.html.

should be specific as to practices,

operations, financial conditions, or

other matters that could have a negative

effect. These commenters also suggested

that MRAs, memoranda of

understanding, and any other formal

written mandates or sanctions should be

based only on a violation of a statute or

regulation. Similarly, these commenters

argued that there should be no

references to guidance in written formal

actions and that banking institutions

should be reassured that they will not

be criticized or cited for a violation of

guidance when no law or regulation is

cited. One commenter suggested that it

would instead be appropriate to discuss

supervisory guidance privately, rather

than publicly, potentially during the

pre-exam meetings or during

examination exit meetings. Another

commenter suggested that, while

referencing guidance in supervisory

criticism may be useful at times,

agencies should provide safeguards to

prevent such references from becoming

the de facto basis for supervisory

criticisms. One commenter stated that

examiners also should not criticize

community banks in their final written

examination reports for not complying

with ‘‘best practices’’ unless the

criticism involves a violation of bank

policy or regulation. The commenter

added that industry best practices

should be transparent enough and

sufficiently known throughout the

industry before being cited in an

examination report. One commenter

requested that examiners should not

apply large bank practices to

community banks that have a different,

less complex and more conservative

business model

involves a violation of bank

policy or regulation. The commenter

added that industry best practices

should be transparent enough and

sufficiently known throughout the

industry before being cited in an

examination report. One commenter

requested that examiners should not

apply large bank practices to

community banks that have a different,

less complex and more conservative

business model. One commenter

asserted that MRAs should not be based

on ‘‘reputational risk,’’ but rather on the

underlying conduct giving rise to

concerns and asked the agencies to

address this in the final rule.

Commenters that opposed the

Proposal did not support restricting

supervisory criticism or sanctions to

explicit violations of law or regulation.

One commenter expressed concern that

requiring supervisors to wait for an

explicit violation of law before issuing

criticism would effectively erase the

line between supervision and

enforcement. According to the

commenter, it would eliminate the

space for supervision as an intermediate

practice of oversight and cooperative

problem-solving between banks and the

regulators who support and manage the

banking system and would also clearly

violate the intent of the law in 12 U.S.C.

1818(b). One commenter emphasized

the importance of bank supervisors

basing their criticisms on imprudent

bank practices that may not yet have

ripened into violations of laws or rules

but could undermine safety and

soundness or pose harm to consumers if

left unaddressed.

One commenter argued that the

agencies should state clearly that

guidance can and will be used by

supervisors to inform their assessments

of banks’ practices; and that it may be

cited as, and serve as the basis for,

criticisms

k practices that may not yet have

ripened into violations of laws or rules

but could undermine safety and

soundness or pose harm to consumers if

left unaddressed.

One commenter argued that the

agencies should state clearly that

guidance can and will be used by

supervisors to inform their assessments

of banks’ practices; and that it may be

cited as, and serve as the basis for,

criticisms. According to the commenter,

even under the legal principles

described in the Proposal, it is

permissible for guidance to be used as

a set of standards that may inform a

criticism, provided that application of

the guidance is used for corrective

purposes, if not to support an

enforcement action.

According to one commenter, the

Proposal makes fine conceptual

distinctions between, for example,

issuing supervisory criticisms ‘‘on the

basis of’’ guidance and issuing

supervisory criticisms that make

‘‘reference’’ to supervisory guidance.

The commenter suggested that is a

distinction that it may be difficult for

‘‘human beings to parse in practice.’’

According to the commenter, a rule that

makes such a distinction is likely to

have a chilling effect on supervisors

attempting to implement policy in the

field. According to another commenter,

the language allowing examiners to

reference supervisory guidance to

provide examples is too vague and

threatens to marginalize the role of

guidance and significantly reduce its

usefulness in the process of issuing

criticisms designed to correct deficient

bank practices.

E. Legal Authority and Visitorial Powers

One commenter questioned the

Federal banking agencies’ reference in

the Proposal to visitorial powers as an

additional authority for early

identification of supervisory concerns

that may not rise to a violation of law,

unsafe or unsound banking practice, or

breach of fiduciary duty under 12 U.S.C.

1818.

F

ned to correct deficient

bank practices.

E. Legal Authority and Visitorial Powers

One commenter questioned the

Federal banking agencies’ reference in

the Proposal to visitorial powers as an

additional authority for early

identification of supervisory concerns

that may not rise to a violation of law,

unsafe or unsound banking practice, or

breach of fiduciary duty under 12 U.S.C.

1818.

F. Issuance and Management of

Supervisory Guidance

Several commenters made suggestions

about how the agencies should issue

and manage supervisory guidance.

Some commenters suggested that the

agencies should delineate clearly

between regulations and supervisory

guidance. Commenters encouraged the

agencies to regularly review, update,

and potentially rescind outstanding

guidance. One commenter suggested

that the agencies rescind outstanding

guidance that functions as rule, but has

not gone through notice and comment.

One commenter suggested that the

agencies memorialize their intent to

revisit and potentially rescind existing

guidance, as well as limit multiple

guidance documents on the same topic.

Commenters suggested that supervisory

guidance should be easy to find, readily

available, online, and in a format that is

user-friendly and searchable.

One commenter encouraged the

agencies to issue principles-based

guidance that avoids the kind of

granularity that could be misconstrued

as binding expectations. According to

this commenter, the agencies can issue

separate frequently asked questions

with more detailed information, but

should clearly identify these as non-

binding illustrations. This commenter

also encouraged the agencies to publish

proposed guidance for comment when

circumstances allow. Another

commenter requested that the agencies

issue all ‘‘rules’’ as defined by the APA

through the notice-and-comment

process

agencies can issue

separate frequently asked questions

with more detailed information, but

should clearly identify these as non-

binding illustrations. This commenter

also encouraged the agencies to publish

proposed guidance for comment when

circumstances allow. Another

commenter requested that the agencies

issue all ‘‘rules’’ as defined by the APA

through the notice-and-comment

process.

One commenter expressed concern

that the agencies will aim to reduce the

issuance of multiple supervisory

guidance documents and will thereby

reduce the availability of guidance in

circumstances where guidance would be

valuable.

Responses to Comments

As stated in the Proposed Rule, the

2018 Statement was intended to focus

on the appropriate use of supervisory

guidance in the supervisory process,

rather than the standards for

supervisory criticisms. The standards

for issuing MRAs or other supervisory

actions were, therefore, outside the

scope of this rulemaking. For this

reason, and for reasons discussed

earlier, the final rule does not address

the standards for MRAs and other

supervisory actions. Similarly, because

the FDIC is not addressing its approach

to supervisory criticism in the final rule,

including any criticism related to

reputation risk, the final rule does not

address supervisory criticisms relating

to ‘‘reputation risk.’’ Nonetheless, the

FDIC affirms that it does not issue

supervisory recommendations,

including MRBAs 17 solely based on

reputation risk.

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to

reputation risk, the final rule does not

address supervisory criticisms relating

to ‘‘reputation risk.’’ Nonetheless, the

FDIC affirms that it does not issue

supervisory recommendations,

including MRBAs 17 solely based on

reputation risk.

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18 See Mortgage Bankers Association, 575 U.S. at

96.

19 Questions concerning the legal and supervisory

nature of interpretive rules are case-specific and

have engendered debate among courts and

administrative law commentators. The FDIC takes

no position in this rulemaking on those specific

debates. See, e.g., R. Levin, Rulemaking and the

Guidance Exemption, 70 Admin. L. Rev. 263 (2018)

(discussing the doctrinal differences concerning the

status of interpretive rules under the APA); see also

Nicholas R. Parillo, Federal Agency Guidance and

the Powder to Bind: An Empirical Study of Agencies

and Industries, 36 Yale J. Reg 165, 168 n.6 (2019)

(‘‘[w]hether interpretive rules are supposed to be

nonbinding is a question subject to much confusion

that is not fully settled’’); see also ACUS,

Recommendation 2019–1, Agency Guidance

Through Interpretive Rules (Adopted June 13,

2019), available at https://www.acus.gov/

recommendation/agency-guidance-through-

interpretive-rules (noting that courts and

commentators have different views on whether

interpretive rules bind an agency and effectively

bind the public through the deference given to

agencies’ interpretations of their own rules under

Auer v. Robbins, 519 U.S. 452 (1997)).

20 Mortgage Bankers Association, 575 U.S. at 97

(citing Shalala v. Guernsey Memorial Hospital, 514

U.S. 87, 99 (1995)); accord Attorney General’s

Manual at 30 n.3.

21 See Chrysler v. Brown, 441 U.S

hether

interpretive rules bind an agency and effectively

bind the public through the deference given to

agencies’ interpretations of their own rules under

Auer v. Robbins, 519 U.S. 452 (1997)).

20 Mortgage Bankers Association, 575 U.S. at 97

(citing Shalala v. Guernsey Memorial Hospital, 514

U.S. 87, 99 (1995)); accord Attorney General’s

Manual at 30 n.3.

21 See Chrysler v. Brown, 441 U.S. at 302 n.31

(quoting Attorney General’s Manual at 30 n.3); see

also, e.g., American Mining Congress v. Mine Safety

& Health Administration, 995 F.2d 1106, 1112 (D.C.

Cir. 1993) (outlining tests in the D.C. Circuit for

assessing whether an agency issuance is an

interpretive rule).

23 Cuomo v. Clearing House Assn L.L.C., 557 U.S.

519,536 (2009).

23 Id. at 533.

24 Watters v. Wachovia Bank, N.A., 550 U.S. 1,

127 (2007).

25 The commenter’s reading of the agencies’

examination and reporting authorities would assert

that the agencies may examine supervised

institutions and require reports, but not make

findings based on such examinations and reporting,

Continued

With respect to the comments on

coverage of interpretive rules, the FDIC

agrees with the commenter that

interpretive rules do not, alone, ‘‘have

the force and effect of law’’ and must be

rooted in, and derived from, a statute or

regulation.18 While interpretive rules

and supervisory guidance are similar in

lacking the force and effect of law,

interpretive rules and supervisory

guidance are distinct under the APA

and its jurisprudence and are generally

issued for different purposes.19

Interpretive rules are typically issued by

an agency to advise the public of the

agency’s construction of the statutes and

rules that it administers,20 whereas

general statements of policy, such as

supervisory guidance, advise the public

of how an agency intends to exercise its

discretionary powers.21 To this end,

guidance generally reflects an agency’s

policy views, for example, on safe and

sound risk management practices

ued by

an agency to advise the public of the

agency’s construction of the statutes and

rules that it administers,20 whereas

general statements of policy, such as

supervisory guidance, advise the public

of how an agency intends to exercise its

discretionary powers.21 To this end,

guidance generally reflects an agency’s

policy views, for example, on safe and

sound risk management practices. On

the other hand, interpretive rules

generally resolve ambiguities regarding

requirements imposed by statutes and

regulations. Because supervisory

guidance and interpretive rules have

different characteristics and serve

different purposes, the FDIC has

decided that the final rule will continue

to cover supervisory guidance only.

With respect to the question of

whether to adopt ACUS’s procedures for

allowing the public to request

reconsideration or revision of an

interpretive rule, this rulemaking, again,

does not address interpretive rules. As

such, the FDIC is not adding procedures

for challenges to interpretive rules

through this rulemaking.

In response to the comment that the

agencies treat examples in guidance as

‘‘safe harbors’’ from supervisory

criticism, the FDIC agrees that examples

offered in supervisory guidance can

provide insight about practices that, in

general, may lead to safe and sound

operation and compliance with

regulations and statutes. The examples

in guidance, however, are generalized.

When an institution implements

examples, examiners must consider the

facts and circumstances of that

institution in assessing the application

of those examples. In addition, the

underlying legal principle of

supervisory guidance is that it does not

create binding legal obligation for either

the public or an agency. As such, the

FDIC does not deem examples used in

supervisory guidance to categorically

establish safe harbors from supervisory

criticism

the

facts and circumstances of that

institution in assessing the application

of those examples. In addition, the

underlying legal principle of

supervisory guidance is that it does not

create binding legal obligation for either

the public or an agency. As such, the

FDIC does not deem examples used in

supervisory guidance to categorically

establish safe harbors from supervisory

criticism.

In response to the comments that the

Proposal may undermine the important

role that supervisory guidance can play

in informing supervisory criticism and

by serving to address conditions before

those conditions lead to enforcement

actions, the FDIC agrees that the

appropriate use of supervisory guidance

generates a more collaborative and

constructive regulatory process that

supports the safety and soundness and

compliance of institutions, thereby

diminishing the need for enforcement

actions. As noted by ACUS, guidance

can make agency decision-making more

predictable and uniform and shield

regulated parties from unequal

treatment, unnecessary costs, and

unnecessary risk, while promoting

compliance with the law. The FDIC

intends, therefore, to continue using

guidance as part of the supervisory

process. The FDIC does not view the

final rule as weakening the role of

guidance in the supervisory process and

the FDIC will continue to use guidance

to support the safety and soundness of

banks and promote compliance with

consumer protection laws and

regulations.

Further, the FDIC does not agree with

one commenter’s assertion that the

Proposal made an unclear distinction

between, on the one hand, inappropriate

supervisory criticism for a ‘‘violation’’

of or ‘‘non-compliance’’ with

supervisory guidance, and, on the other

hand, FDIC examiners’ use of

supervisory guidance to reference

examples of safe and sound conduct,

appropriate consumer protection and

risk management practices, and other

actions for addressing compliance with

laws or regulations

nction

between, on the one hand, inappropriate

supervisory criticism for a ‘‘violation’’

of or ‘‘non-compliance’’ with

supervisory guidance, and, on the other

hand, FDIC examiners’ use of

supervisory guidance to reference

examples of safe and sound conduct,

appropriate consumer protection and

risk management practices, and other

actions for addressing compliance with

laws or regulations. This approach

appropriately implements the principle

that institutions are not required to

follow supervisory guidance in itself but

may find such guidance useful.

With respect to the comment that

visitorial powers do not provide the

Federal banking agencies with authority

to issue MRAs or other supervisory

criticisms, the FDIC disagrees. The

FDIC’s visitorial powers are well-

established. The Supreme Court’s

decision in Cuomo v. Clearing House

Assn L.L.C. explained that the visitation

included the ‘‘exercise of supervisory

power.’’ 22 The Court ruled that the

‘‘power to enforce the law exists

separate and apart from the power of

visitation.’’ 23 While the Cuomo

decision involved the question of which

powers may be exercised by state

governments (and ruled that states

could exercise law enforcement powers,

but could not exercise visitorial

powers), the decision did not dispute

that the Federal banking agencies

possess both these powers. The Court in

Cuomo explained that visitorial powers

entailed ‘‘oversight and supervision,’’

while the Court’s earlier decision in

Watters v. Wachovia Bank, N.A.

explained that visitorial powers entailed

‘‘general supervision and control.’’ 24

Accordingly, visitorial powers include

the power to issue supervisory

criticisms independent of the agencies’

authority to enforce applicable laws or

ensure safety and soundness

hat visitorial powers

entailed ‘‘oversight and supervision,’’

while the Court’s earlier decision in

Watters v. Wachovia Bank, N.A.

explained that visitorial powers entailed

‘‘general supervision and control.’’ 24

Accordingly, visitorial powers include

the power to issue supervisory

criticisms independent of the agencies’

authority to enforce applicable laws or

ensure safety and soundness. For these

reasons, the FDIC reaffirms the

statement in the preamble to the

Proposed Rule that such visitorial

powers have been conferred through

statutory examination and reporting

authorities, which facilitate the FDIC’s

identification of supervisory concerns

that may not rise to a violation of law,

unsafe or unsound practice, or breach of

fiduciary duty under 12 U.S.C. 1818.

These statutory examination and

reporting authorities pre-existed 12

U.S.C. 1818, which neither superseded

nor replaced such authorities. The FDIC

has been vested with statutory

examination and reporting authorities

with respect to banks under its

supervision.25

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unless the finding is sufficient to warrant a formal

enforcement action under the standard set out in 12

U.S.C. 1818. This reading is inconsistent with the

history of federal banking supervision, including as

described in the cases cited in the Proposed Rule.

26 Am. Hosp. Ass’n v. Bowen, 834 F.2d 1037, 1045

(D.C. Cir. 1987). The specific contours of these

exceptions are the subject of an extensive body of

case law.

27 44 U.S.C. 3501–3521.

28 5 U.S.C. 601 et seq.

29 5 U.S.C. 605(b)

out in 12

U.S.C. 1818. This reading is inconsistent with the

history of federal banking supervision, including as

described in the cases cited in the Proposed Rule.

26 Am. Hosp. Ass’n v. Bowen, 834 F.2d 1037, 1045

(D.C. Cir. 1987). The specific contours of these

exceptions are the subject of an extensive body of

case law.

27 44 U.S.C. 3501–3521.

28 5 U.S.C. 601 et seq.

29 5 U.S.C. 605(b).

30 The SBA defines a small banking organization

as having $600 million or less in assets, where an

organization’s ‘‘assets are determined by averaging

the assets reported on its four quarterly financial

statements for the preceding year.’’ See 13 CFR

121.201 (as amended by 84 FR 34261, effective

August 19, 2019). In its determination, the ‘‘SBA

counts the receipts, employees, or other measure of

size of the concern whose size is at issue and all

of its domestic and foreign affiliates.’’ See 13 CFR

121.103. Following these regulations, the FDIC uses

a covered entity’s affiliated and acquired assets,

averaged over the preceding four quarters, to

determine whether the covered entity is ‘‘small’’ for

the purposes of RFA.

In response to comments regarding

the role of public comment for

supervisory guidance, the FDIC notes

that it has made clear through the 2018

Statement and in this final rule that

supervisory guidance (including

guidance that goes through public

comment) does not create binding,

enforceable legal obligations. Rather, the

FDIC in some instances issues

supervisory guidance for comment in

order to improve its understanding of an

issue, gather information, or seek ways

to achieve a supervisory objective most

effectively. Similarly, examples that are

included in supervisory guidance

(including guidance that goes through

public comment) are not binding on

institutions

enforceable legal obligations. Rather, the

FDIC in some instances issues

supervisory guidance for comment in

order to improve its understanding of an

issue, gather information, or seek ways

to achieve a supervisory objective most

effectively. Similarly, examples that are

included in supervisory guidance

(including guidance that goes through

public comment) are not binding on

institutions. Rather, these examples are

intended to be illustrative of ways a

supervised institution may implement

safe and sound practices, appropriate

consumer protection, prudent risk

management, or other actions in

furtherance of compliance with laws or

regulations. Relatedly, the FDIC does

not agree with one comment that it

should use notice-and-comment

procedures, without exception, to issue

all ‘‘rules’’ as defined by the APA,

which would include supervisory

guidance. Congress has established

longstanding exceptions in the APA

from the notice and comment process

for certain ‘‘rules,’’ including for general

statements of policy like supervisory

guidance and for interpretive rules. As

one court has explained, Congress

intended to ‘‘accommodate situations

where the policies promoted by public

participation in rulemaking are

outweighed by the countervailing

considerations of effectiveness,

efficiency, expedition and reduction in

expense.’’ 26

With respect to the commenter’s

request that the agencies affirm that they

will apply statutory factors while

processing applications, the FDIC

affirms that the agency will continue to

consider and apply all applicable

statutory factors when processing

applications.

In response to the question raised by

some commenters concerning potential

confusion between supervisory

guidance and interpretive rules, the

FDIC notes that interpretive rules are

outside the scope of the rulemaking. In

addition, as stated earlier, interpretive

rules do not, alone, ‘‘have the force and

effect of law’’ and must be rooted in,

and derived from, a statute or

regulation

ns.

In response to the question raised by

some commenters concerning potential

confusion between supervisory

guidance and interpretive rules, the

FDIC notes that interpretive rules are

outside the scope of the rulemaking. In

addition, as stated earlier, interpretive

rules do not, alone, ‘‘have the force and

effect of law’’ and must be rooted in,

and derived from, a statute or

regulation. While interpretive rules and

supervisory guidance are similar in

lacking the force and effect of law,

interpretive rules and supervisory

guidance are distinct under the APA

and its jurisprudence and are generally

issued for different purposes. The FDIC

believes that when it issues an

interpretive rule, the fact that it is an

interpretive rule is generally clear. In

addition, these comments relate to

clarity in drafting, rather than a matter

that seems suitable for rulemaking.

In response to the two commenters

opposing the Proposal, this final rule

does not undermine any of the FDIC’s

safety and soundness or other

authorities. Indeed, the final rule is

designed to support the FDIC’s ability to

supervise banks effectively. In addition,

the FDIC notes the question of the role

of guidance has been one of interest to

regulated parties and other stakeholders

over the past few years. The Petition

and the number of comments on the

Proposal are a sign of this interest. As

such, the FDIC believes it will serve the

public interest to reaffirm the

appropriate role of supervisory

guidance. There are inherent benefits to

the supervisory process whenever

institutions and examiners have a clear

understanding of their roles, including

how supervisory guidance can be used

effectively within legal limits.

Therefore, the FDIC is proceeding with

the rule as proposed

such, the FDIC believes it will serve the

public interest to reaffirm the

appropriate role of supervisory

guidance. There are inherent benefits to

the supervisory process whenever

institutions and examiners have a clear

understanding of their roles, including

how supervisory guidance can be used

effectively within legal limits.

Therefore, the FDIC is proceeding with

the rule as proposed.

In response to the commenter

expressing concern that language in the

Statement on reducing multiple

supervisory guidance documents on the

same topic will limit the FDIC’s ability

to provide valuable guidance, the FDIC

assures the commenter that this

language will not inhibit the FDIC from

issuing new supervisory guidance when

appropriate.

Finally, the FDIC appreciates the

other comments related to other aspects

of guidance or the supervisory process,

but the FDIC does not believe that they

are best addressed in this rulemaking.

III. The Final Rule

For the reasons discussed above, the

final rule adopts the Proposed Rule

without substantive changes. However,

the FDIC has decided to issue a final

rule that is specifically addressed to the

FDIC and FDIC-supervised institutions,

rather than the joint version that the five

agencies included in their joint

Proposal. Although many of the

comments were applicable to all of the

agencies, some comments were specific

to particular agencies or to groups of

agencies. Having separate final rules has

enabled agencies to better focus on

explaining any agency-specific issues to

their respective audiences of supervised

institutions and agency employees.

IV. Administrative Law Matters

A. Paperwork Reduction Act

The Paperwork Reduction Act of

1995 27 (PRA) states that no agency may

conduct or sponsor, nor is the

respondent required to respond to, an

information collection unless it displays

a currently valid Office of Management

and Budget (OMB) control number

to

their respective audiences of supervised

institutions and agency employees.

IV. Administrative Law Matters

A. Paperwork Reduction Act

The Paperwork Reduction Act of

1995 27 (PRA) states that no agency may

conduct or sponsor, nor is the

respondent required to respond to, an

information collection unless it displays

a currently valid Office of Management

and Budget (OMB) control number. The

FDIC has reviewed this final rule and

determined that it does not contain any

information collection requirements

subject to the PRA. Accordingly, no

submissions to OMB will be made with

respect to this final rule.

B. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA)

generally requires that, in connection

with a final rulemaking, an agency

prepare and make available for public

comment a final regulatory flexibility

analysis describing the impact of the

final rule on small entities.28 However,

a regulatory flexibility analysis is not

required if the agency certifies that the

rule will not have a significant

economic impact on a substantial

number of small entities.29 The Small

Business Administration (SBA) has

defined ‘‘small entities’’ to include

banking organizations with total assets

of less than or equal to $600 million that

are independently owned and operated

or owned by a holding company with

less than or equal to $600 million in

total assets.30 Generally, the FDIC

considers a significant effect to be a

quantified effect in excess of 5 percent

of total annual salaries and benefits per

institution, or 2.5 percent of total non-

interest expenses. The FDIC believes

that effects in excess of these thresholds

typically represent significant effects for

FDIC-supervised institutions.

As of September 30, 2020, the FDIC

supervised 3,245 institutions, of which

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of total non-

interest expenses. The FDIC believes

that effects in excess of these thresholds

typically represent significant effects for

FDIC-supervised institutions.

As of September 30, 2020, the FDIC

supervised 3,245 institutions, of which

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31 FDIC Consolidated Reports of Condition and

Income Data, September 30, 2020.

32 Public Law 106–102, section 722, 113 Stat.

1338, 1471 (1999), 12 U.S.C. 4809.

33 12 U.S.C. 4802(a).

34 12 U.S.C. 4802.

35 5 U.S.C. 801 et seq.

36 5 U.S.C. 801(a)(3).

37 5 U.S.C. 804(2).

1 Government agencies issue regulations that

generally have the force and effect of law. Such

regulations generally take effect only after the

agency proposes the regulation to the public and

responds to comments on the proposal in a final

rulemaking document.

2,434 were considered small for

purposes of RFA.31 This final rule does

not impose any obligations on FDIC-

supervised entities, and FDIC-

supervised entities do not need to take

any action in response to this rule. For

these reasons, and under section 605(b)

of the RFA, the FDIC certifies that the

final rule will not have a significant

economic impact on a substantial

number of small FDIC-supervised

institutions.

C. Plain Language

Section 722 of the Gramm-Leach-

Bliley Act 32 requires the Federal

banking agencies to use plain language

in all proposed and final rules

published after January 1, 2000. The

FDIC has sought to present the final rule

in a simple and straightforward manner

and did not receive any comments on

the use of plain language in the

Proposed Rule.

D

IC-supervised

institutions.

C. Plain Language

Section 722 of the Gramm-Leach-

Bliley Act 32 requires the Federal

banking agencies to use plain language

in all proposed and final rules

published after January 1, 2000. The

FDIC has sought to present the final rule

in a simple and straightforward manner

and did not receive any comments on

the use of plain language in the

Proposed Rule.

D. Riegle Community Development and

Regulatory Improvement Act of 1994

Pursuant to section 302(a) of the

Riegle Community Development and

Regulatory Improvement Act

(RCDRIA),33 in determining the effective

date and administrative compliance

requirements for new regulations that

impose additional reporting, disclosure,

or other requirements on insured

depository institutions (IDIs), each

Federal banking agency must consider,

consistent with principles of safety and

soundness and the public interest, any

administrative burdens that such

regulations would place on depository

institutions, including small depository

institutions, and customers of

depository institutions, as well as the

benefits of such regulations. In addition,

section 302(b) of RCDRIA requires new

regulations and amendments to

regulations that impose additional

reporting, disclosures, or other new

requirements on IDIs generally to take

effect on the first day of a calendar

quarter that begins on or after the date

on which the regulations are published

in final form.34 The FDIC has

determined that the final rule will not

impose additional reporting, disclosure,

or other requirements on IDIs; therefore,

the requirements of the RCDRIA do not

apply.

E

rting, disclosures, or other new

requirements on IDIs generally to take

effect on the first day of a calendar

quarter that begins on or after the date

on which the regulations are published

in final form.34 The FDIC has

determined that the final rule will not

impose additional reporting, disclosure,

or other requirements on IDIs; therefore,

the requirements of the RCDRIA do not

apply.

E. Congressional Review Act

For purposes of Congressional Review

Act, the OMB makes a determination as

to whether a final rule constitutes a

‘‘major’’ rule.35 If a rule is deemed a

‘‘major rule’’ by the OMB, the

Congressional Review Act generally

provides that the rule may not take

effect until at least 60 days following its

publication.36

The Congressional Review Act defines

a ‘‘major rule’’ as any rule that the

Administrator of the Office of

Information and Regulatory Affairs of

the OMB finds has resulted in or is

likely to result in (A) an annual effect

on the economy of $100,000,000 or

more; (B) a major increase in costs or

prices for consumers, individual

industries, Federal, State, or local

government agencies or geographic

regions, or (C) significant adverse effects

on competition, employment,

investment, productivity, innovation, or

on the ability of United States-based

enterprises to compete with foreign-

based enterprises in domestic and

export markets.37 As required by the

Congressional Review Act, the FDIC

will submit the final rule and other

appropriate reports to Congress and the

Government Accountability Office for

review.

List of Subjects in 12 CFR Part 302

Administrative practice and

procedure, Banks, banking.

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Chapter III

Authority and Issuance

■For the reasons set forth in the

preamble, the FDIC adds part 302 to 12

CFR chapter III, subchapter A, to read as

follows:

PART 302—USE OF SUPERVISORY

GUIDANCE

Sec.

302.1

Purpose.

302.2

Implementation of the Statement

Clarifying the Role of Supervisory

Guidance

e practice and

procedure, Banks, banking.

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Chapter III

Authority and Issuance

■For the reasons set forth in the

preamble, the FDIC adds part 302 to 12

CFR chapter III, subchapter A, to read as

follows:

PART 302—USE OF SUPERVISORY

GUIDANCE

Sec.

302.1

Purpose.

302.2

Implementation of the Statement

Clarifying the Role of Supervisory

Guidance.

302.3

Rule of construction.

Appendix A to Part 302—Statement

Clarifying the Role of Supervisory

Guidance

Authority: 5 U.S.C. 552; 12 U.S.C. 1818,

1819(a) (Seventh and Tenth), 1831p–1.

§ 302.1

Purpose.

The FDIC issues regulations and

guidance as part of its supervisory

function. This subpart reiterates the

distinctions between regulations and

guidance, as stated in the Statement

Clarifying the Role of Supervisory

Guidance (appendix A to this part)

(Statement).

§ 302.2

Implementation of the Statement

Clarifying the Role of Supervisory

Guidance.

The Statement describes the official

policy of the FDIC with respect to the

use of supervisory guidance in the

supervisory process. The Statement is

binding on the FDIC.

§ 302.3

Rule of construction.

This subpart does not alter the legal

status of guidelines authorized by

statute, including but not limited to, 12

U.S.C. 1831p–1, to create binding legal

obligations.

Appendix A to Part 302—Statement

Clarifying the Role of Supervisory

Guidance

Statement Clarifying the Role of Supervisory

Guidance

The FDIC is issuing this statement to

explain the role of supervisory guidance and

to describe the FDIC’s approach to

supervisory guidance.

Difference Between Supervisory Guidance

and Laws or Regulations

The FDIC issues various types of

supervisory guidance, including interagency

statements, advisories, policy statements,

questions and answers, and frequently asked

questions, to its supervised institutions

this statement to

explain the role of supervisory guidance and

to describe the FDIC’s approach to

supervisory guidance.

Difference Between Supervisory Guidance

and Laws or Regulations

The FDIC issues various types of

supervisory guidance, including interagency

statements, advisories, policy statements,

questions and answers, and frequently asked

questions, to its supervised institutions. A

law or regulation has the force and effect of

law.1 Unlike a law or regulation, supervisory

guidance does not have the force and effect

of law, and the FDIC does not take

enforcement actions based on supervisory

guidance. Rather, supervisory guidance

outlines the FDIC’s supervisory expectations

or priorities and articulates the FDIC’s

general views regarding appropriate practices

for a given subject area. Supervisory

guidance often provides examples of

practices that the FDIC generally considers

consistent with safety-and-soundness

standards or other applicable laws and

regulations, including those designed to

protect consumers. Supervised institutions at

times request supervisory guidance, and such

guidance is important to provide insight to

industry, as well as supervisory staff, in a

transparent way that helps to ensure

consistency in the supervisory approach.

Ongoing Efforts To Clarify the Role of

Supervisory Guidance

The FDIC is clarifying the following

policies and practices related to supervisory

guidance:

• The FDIC intends to limit the use of

numerical thresholds or other ‘‘bright-lines’’

in describing expectations in supervisory

guidance. Where numerical thresholds are

used, the FDIC intends to clarify that the

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lated to supervisory

guidance:

• The FDIC intends to limit the use of

numerical thresholds or other ‘‘bright-lines’’

in describing expectations in supervisory

guidance. Where numerical thresholds are

used, the FDIC intends to clarify that the

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12086

Federal Register / Vol. 86, No. 39 / Tuesday, March 2, 2021 / Rules and Regulations

thresholds are exemplary only and not

suggestive of requirements. The FDIC will

continue to use numerical thresholds to

tailor, and otherwise make clear, the

applicability of supervisory guidance or

programs to supervised institutions, and as

required by statute.

• Examiners will not criticize through

supervisory recommendations (including

matters requiring board attention) a

supervised financial institution for, and the

FDIC will not issue an enforcement action on

the basis of, a ‘‘violation’’ of or ‘‘non-

compliance’’ with supervisory guidance. In

some situations, examiners may reference

(including in writing) supervisory guidance

to provide examples of safe and sound

conduct, appropriate consumer protection

and risk management practices, and other

actions for addressing compliance with laws

or regulations.

• Supervisory criticisms should continue

to be specific as to practices, operations,

financial conditions, or other matters that

could have a negative effect on the safety and

soundness of the financial institution, could

cause consumer harm, or could cause

violations of laws, regulations, final agency

orders, or other legally enforceable

conditions.

• The FDIC also has at times sought, and

may continue to seek, public comment on

supervisory guidance. Seeking public

comment on supervisory guidance does not

mean that the guidance is intended to be a

regulation or have the force and effect of law

ion, could

cause consumer harm, or could cause

violations of laws, regulations, final agency

orders, or other legally enforceable

conditions.

• The FDIC also has at times sought, and

may continue to seek, public comment on

supervisory guidance. Seeking public

comment on supervisory guidance does not

mean that the guidance is intended to be a

regulation or have the force and effect of law.

The comment process helps the FDIC to

improve its understanding of an issue, to

gather information on institutions’ risk

management practices, or to seek ways to

achieve a supervisory objective most

effectively and with the least burden on

institutions.

• The FDIC will aim to reduce the issuance

of multiple supervisory guidance documents

on the same topic and will generally limit

such multiple issuances going forward.

The FDIC will continue efforts to make the

role of supervisory guidance clear in

communications to examiners and to

supervised financial institutions and

encourage supervised institutions with

questions about this statement or any

applicable supervisory guidance to discuss

the questions with their appropriate agency

contact.

Federal Deposit Insurance Corporation.

By order of the Board of Directors.

Dated at Washington, DC, on January 19,

2021.

James P. Sheesley,

Assistant Executive Secretary.

[FR Doc. 2021–01537 Filed 3–1–21; 8:45 am]

BILLING CODE 6714–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA–2020–0905; Project

Identifier 2019–SW–102–AD; Amendment

39–21384; AD 2021–02–01]

RIN 2120–AA64

Airworthiness Directives; Airbus

Helicopters

AGENCY: Federal Aviation

Administration (FAA), Department of

Transportation (DOT).

ACTION: Final rule.

SUMMARY: The FAA is superseding

Airworthiness Directive (AD) 2015–26–

01, which applied to certain Airbus

Helicopters Model AS332C1, AS332L1,

AS332L2, EC225LP, AS–365N2, AS 365

N3, EC 155B, and EC155B1 helicopters

with an energy-absorbing seat

worthiness Directives; Airbus

Helicopters

AGENCY: Federal Aviation

Administration (FAA), Department of

Transportation (DOT).

ACTION: Final rule.

SUMMARY: The FAA is superseding

Airworthiness Directive (AD) 2015–26–

01, which applied to certain Airbus

Helicopters Model AS332C1, AS332L1,

AS332L2, EC225LP, AS–365N2, AS 365

N3, EC 155B, and EC155B1 helicopters

with an energy-absorbing seat. AD

2015–26–01 required inspecting for the

presence of labels (placards) that

prohibit stowing anything under the

seat, and if a label (placard) is missing

or not clearly visible to each occupant,

installing a label (placard). This AD

retains all of the requirements of AD

2015–26–01, and also adds helicopters

to the applicability and requires a

modification (installing new labels

(placards)). This AD was prompted by

the determination that additional

helicopters are affected by the unsafe

condition, and that new labels

(placards) are required for all affected

helicopters. The FAA is issuing this AD

to address the unsafe condition on these

products.

DATES: This AD is effective April 6,

2021.

The Director of the Federal Register

approved the incorporation by reference

of certain publications listed in this AD

as of April 6, 2021.

The Director of the Federal Register

approved the incorporation by reference

of certain other publications listed in

this AD as of January 26, 2016 (80 FR

79466, December 22, 2015).

ADDRESSES: For service information

identified in this final rule, contact

Airbus Helicopters, 2701 N Forum

Drive, Grand Prairie, TX 75052; phone:

972–641–0000 or 800–232–0323; fax:

972–641–3775; or at https://

www.airbus.com/helicopters/services/

support.html. You may view this

referenced service information at the

FAA, Office of the Regional Counsel,

Southwest Region, 10101 Hillwood

Pkwy., Room 6N–321, Fort Worth, TX

76177. For information on the

availability of this material at the FAA,

call 817–222–5110

rairie, TX 75052; phone:

972–641–0000 or 800–232–0323; fax:

972–641–3775; or at https://

www.airbus.com/helicopters/services/

support.html. You may view this

referenced service information at the

FAA, Office of the Regional Counsel,

Southwest Region, 10101 Hillwood

Pkwy., Room 6N–321, Fort Worth, TX

76177. For information on the

availability of this material at the FAA,

call 817–222–5110. It is also available

on the internet at https://

www.regulations.gov by searching for

and locating Docket No. FAA–2020–

0905.

Examining the AD Docket

You may examine the AD docket on

the internet at https://

www.regulations.gov by searching for

and locating Docket No. FAA–2020–

0905; or in person at Docket Operations

between 9 a.m. and 5 p.m., Monday

through Friday, except Federal holidays.

The AD docket contains this final rule,

any comments received, and other

information. The address for Docket

Operations is U.S. Department of

Transportation, Docket Operations, M–

30, West Building Ground Floor, Room

W12–140, 1200 New Jersey Avenue SE,

Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT:

Kathleen Arrigotti, Aviation Safety

Engineer, Large Aircraft Section,

International Validation Branch, FAA,

2200 South 216th St., Des Moines, WA

98198; phone and fax: 206–231–3218;

email: kathleen.arrigotti@faa.gov.

SUPPLEMENTARY INFORMATION:

Discussion

The FAA issued a notice of proposed

rulemaking (NPRM) to amend 14 CFR

part 39 to supersede AD 2015–26–01,

Amendment 39–18349 (80 FR 79466,

December 22, 2015) (AD 2015–26–01).

AD 2015–26–01 applied to certain

Airbus Helicopters Model AS332C1,

AS332L1, AS332L2, EC225LP, AS–

365N2, AS 365 N3, EC 155B, and

EC155B1 helicopters with an energy-

absorbing seat. The NPRM published in

the Federal Register on October 7, 2020

(85 FR 63240)

king (NPRM) to amend 14 CFR

part 39 to supersede AD 2015–26–01,

Amendment 39–18349 (80 FR 79466,

December 22, 2015) (AD 2015–26–01).

AD 2015–26–01 applied to certain

Airbus Helicopters Model AS332C1,

AS332L1, AS332L2, EC225LP, AS–

365N2, AS 365 N3, EC 155B, and

EC155B1 helicopters with an energy-

absorbing seat. The NPRM published in

the Federal Register on October 7, 2020

(85 FR 63240). The NPRM was

prompted by the discovery that required

labels (placards) prohibiting stowage of

any object under an energy-absorbing

seat had not been systematically

installed and the determination that

additional helicopters are affected by

the unsafe condition, and that new

labels (placards) are required for all

affected helicopters. The NPRM

proposed to continue to require

inspecting for the presence of labels

(placards) that prohibit stowing

anything under the seat, and if a label

(placard) is missing or not clearly

visible to each occupant, installing a

label (placard), and also proposed to

add helicopters to the applicability and

require a modification (installing new

labels (placards)). The FAA is issuing

this AD to address any object stowed

under an energy-absorbing seat, which

could reduce the efficiency of the

energy-absorbing function of the seat,

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