Internal Appeals Process for Material Supervisory Determinations and Policy Statement Regarding the Ombudsman for the Federal Reserve System

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BOARD OF GOVERNORS

OF THE

FEDERAL RESERVE SYSTEM

WASHINGTON, D.C. 20551

DIVISION OF SUPERVISION

AND REGULATION

DIVISION OF CONSUMER AND

COMMUNITY AFFAIRS

SR 20-28

CA 20-14

December 4, 2020

TO THE OFFICER IN CHARGE OF SUPERVISION

AT EACH FEDERAL RESERVE BANK

SUBJECT: Internal Appeals Process for Material Supervisory Determinations and Policy

Statement Regarding the Ombudsman for the Federal Reserve System

Applicability: This guidance applies to institutions, including those with $10 billion or less in

total consolidated assets, that receive a material supervisory determination by the Federal

Reserve.

On April 1, 2020, the Federal Reserve Board updated its policy statement governing the

internal appeals process for material supervisory determinations and revised the Board’s

Ombudsman policy.1 As explained in the attached policy statement, the Board is committed to

maintaining an independent, intra-agency process to review appeals of material supervisory

determinations that complies with Section 309 of the Riegle Community Development and

Regulatory Improvement Act of 1994.2 The Board is also committed to maintaining an effective

Ombudsman to serve as a resource for individuals and institutions that are affected by the

Federal Reserve’s regulatory and supervisory actions.

1 With the issuance of this SR/CA letter, SR letter 95-18, “Section 309 of the Riegle Community Development and

Regulatory Improvement Act of 1994, Intra-Agency Appeals Process,” is superseded

e Board is also committed to maintaining an effective

Ombudsman to serve as a resource for individuals and institutions that are affected by the

Federal Reserve’s regulatory and supervisory actions.

1 With the issuance of this SR/CA letter, SR letter 95-18, “Section 309 of the Riegle Community Development and

Regulatory Improvement Act of 1994, Intra-Agency Appeals Process,” is superseded.

A “material supervisory determination” includes, but is not limited to, any material determination relating to

examination or inspection composite ratings, material examination or inspection component ratings, the adequacy of

loan loss reserves and/or capital, significant loan classification, accounting interpretation, Matters Requiring

Attention, Matters Requiring Immediate Attention, Community Reinvestment Act ratings (including component

ratings), and consumer compliance ratings. The term does not include any supervisory determination for which an

independent right of appeal exists or a referral to another government agency.

2 Refer to 12 U.S.C. 4806.

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Overview of Amended Appeals Process

As set forth in the policy statement, the Board amended its appeals process to improve

and expedite the process. For instance, the amended appeals process specifies the standards of

review that the Board will follow, and describes the selection of the review panel members. The

amended appeals process also decreases the processing time for appeals, and provides an

expedited timeline for appeals of determinations that relate to or that would cause an institution

to become critically undercapitalized under the Prompt Corrective Action framework. Other

changes to the appeals process include reducing the number of review levels from three under

the prior process to two, and increasing transparency through public disclosure of final appeal

decisions in redacted or summary form determined by the Board

ions that relate to or that would cause an institution

to become critically undercapitalized under the Prompt Corrective Action framework. Other

changes to the appeals process include reducing the number of review levels from three under

the prior process to two, and increasing transparency through public disclosure of final appeal

decisions in redacted or summary form determined by the Board.

Overview of the Ombudsman Policy

The amended Ombudsman policy formalizes many of the current practices of the

Ombudsman, including receiving supervisory-related complaints and material supervisory

determination appeals. In addition, the amended policy clarifies that the Ombudsman may attend

meetings or deliberations relating to an appeal as an observer, if requested by the institution or

Federal Reserve staff. The amended policy also formalizes the Ombudsman’s role as the

decision-maker with respect to claims of retaliation.

Reserve Banks are asked to distribute this letter to the supervised institutions in their

districts and to appropriate supervisory staff. Questions regarding this letter may be sent via the

Board’s public website.3 Questions regarding this letter may also be directed to the Board

Ombudsman’s Office, 1-800-337-0429.

Michael S. Gibson

Eric S. Belsky

Director

Director

Division of Supervision

Division of Consumer and

and Regulation

Community Affairs

Attachment:

• “Internal Appeals Process for Material Supervisory Determinations and Policy Statement

Regarding the Ombudsman for the Federal Reserve System”

Supersedes:

•

SR letter 95-18, “Section 309 of the Riegle Community Development and Regulatory

Improvement Act of 1994, Intra-Agency Appeals Process”

3 See http://www.federalreserve.gov/apps/contactus/feedback.aspx

y Affairs

Attachment:

• “Internal Appeals Process for Material Supervisory Determinations and Policy Statement

Regarding the Ombudsman for the Federal Reserve System”

Supersedes:

•

SR letter 95-18, “Section 309 of the Riegle Community Development and Regulatory

Improvement Act of 1994, Intra-Agency Appeals Process”

3 See http://www.federalreserve.gov/apps/contactus/feedback.aspx

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FEDERAL RESERVE SYSTEM

[Docket No. OP-1696]

Internal Appeals Process for Material Supervisory Determinations and

Policy Statement Regarding the Ombudsman for the Federal Reserve

System1

PROCESS FOR APPEALS OF MATERIAL SUPERVISORY

DETERMINATIONS

The Board is committed to maintaining an independent, intra-agency

process to review appeals of material supervisory determinations that complies

with section 309 of the Riegle Community Development and Regulatory

Improvement Act of 1994, 12 U.S.C. 4806.

The purpose of this document is to establish a comprehensive appellate

process for material supervisory determinations. In order to ensure that

institutions will be granted the same appellant rights regardless of the Federal

Reserve district in which they reside, appeals will be administered using

procedures that are consistent with this process. This process includes an

accelerated review process to improve its alignment with the Prompt Corrective

Action (“PCA”) framework under section 38 of the Federal Deposit Insurance

Act (“FDI Act”.)

A.

In General

Any institution about which the Federal Reserve makes a written material

supervisory determination is eligible to utilize the appeals process. An eligible

institution includes a state member bank, bank holding company and its

nonbank subsidiaries, U.S

t with the Prompt Corrective

Action (“PCA”) framework under section 38 of the Federal Deposit Insurance

Act (“FDI Act”.)

A.

In General

Any institution about which the Federal Reserve makes a written material

supervisory determination is eligible to utilize the appeals process. An eligible

institution includes a state member bank, bank holding company and its

nonbank subsidiaries, U.S. agency or branch of a foreign bank, Edge and

agreement corporation, savings and loan holding company, third party

electronic data processing servicer, systemically important nonbanking

financial organization identified by the Financial Stability Oversight Council,

and any other entity examined or inspected by the Federal Reserve.

1 See Board of Governors of the Federal Reserve System, “Internal Appeals Process for Material Supervisory

Determinations and Policy Statement Regarding the Ombudsman for the Federal Reserve System,” Federal

Register, vol. 85, pp. 15175-183 (March 17, 2020).

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An appeal under this process may be made of any written material

supervisory determination. A “material supervisory determination” includes,

but is not limited to, any material determination relating to examination or

inspection composite ratings, material examination or inspection component

ratings, the adequacy of loan loss reserves and/or capital, significant loan

classification, accounting interpretation, Matters Requiring Attention

(“MRAs”), Matters Requiring Immediate Attention (“MRIAs”), Community

Reinvestment Act ratings (including component ratings), and consumer

compliance ratings. The term does not include any supervisory determination

for which an independent right of appeal exists or a referral to another

government agency

significant loan

classification, accounting interpretation, Matters Requiring Attention

(“MRAs”), Matters Requiring Immediate Attention (“MRIAs”), Community

Reinvestment Act ratings (including component ratings), and consumer

compliance ratings. The term does not include any supervisory determination

for which an independent right of appeal exists or a referral to another

government agency. Excluded actions include, for example, PCA directives

issued pursuant to section 38 of the FDI Act; an action to impose administrative

enforcement actions under the FDI Act, the Home Owners’ Loan Act of 1933,

the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Bank

Holding Company Act of 1956 (“BHC Act”) or other applicable act; a capital

directive; an order related to approval or denial of a transaction issued pursuant

to section 3 or 4 of the BHC Act; written notice of a referral to the Attorney

General pursuant to the Equal Credit Opportunity Act (“ECOA”) or a notice to

the Secretary of Housing and Urban Development for violations of the ECOA

or the Fair Housing Act; and determinations made under the Shared National

Credit Program.

B.

General Procedures for Appealing a Material Supervisory

Determination

In general, the appeals process is an informal process that is not subject

to the adjudicative provisions of the Administrative Procedures Act (5 U.S.C.

554, 556-557). An appeal of a material supervisory determination shall be filed

and considered pursuant to the following procedures:

National

Credit Program.

B.

General Procedures for Appealing a Material Supervisory

Determination

In general, the appeals process is an informal process that is not subject

to the adjudicative provisions of the Administrative Procedures Act (5 U.S.C.

554, 556-557). An appeal of a material supervisory determination shall be filed

and considered pursuant to the following procedures:

(1)

Authorization to File. Any appeal must be approved by the board

of directors of the eligible institution or by its senior management in

consultation with its board of directors. Senior management is defined as the

core group of individuals directly accountable to the board of directors for the

sound and prudent day-to-day management of the firm, or in the case of a U.S.

agency or branch of a foreign bank, responsible for the bank’s U.S. operations.

Senior management shall inform the board of directors of the substance of the

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appeal before filing the appeal and shall keep the board of directors informed of

the status of the appeal.

(2)

Timelines and Contents. The institution must file the appeal in

writing with the Board’s Ombudsman within 30 calendar days of the earlier of

the date the material supervisory determination was sent electronically, the date

the institution received the written determination, or the date the Reserve Bank

received confirmation that the institution received the determination, with a

copy to the officer in charge of supervision at the appropriate Reserve Bank.

When the deadline for filing an appeal falls on a weekend or federal holiday,

the deadline for the appeal shall be the next business day. The institution may

file a written request for an extension of the time to file an appeal with the

Ombudsman, which request shall state good cause for granting the extension

h a

copy to the officer in charge of supervision at the appropriate Reserve Bank.

When the deadline for filing an appeal falls on a weekend or federal holiday,

the deadline for the appeal shall be the next business day. The institution may

file a written request for an extension of the time to file an appeal with the

Ombudsman, which request shall state good cause for granting the extension.

Such request shall be granted in the sole discretion of the director of the

appropriate division of the Board in consultation with the Board’s General

Counsel or his designee. The appeal must include a clear and complete

statement of all relevant facts and issues, as well as all arguments that the

institution wishes to present, and must include all relevant and material

documents that the institution wishes to be considered. Prior to a material

supervisory determination being made, it is expected that the institution will

have provided all available information it believes to be relevant to the

examination staff to assist them in making the determination. Accordingly,

absent good cause, as determined in the discretion of the initial review panel,

any facts or data submitted by the institution in connection with the appeal shall

be limited to those that were made available to examination staff prior to the

date on which the written material supervisory determination was delivered to

the institution.

(3)

Distribution of Appeal. After receipt of a request for an appeal,

the Board’s Ombudsman shall promptly notify the director of the appropriate

division of the Board and the Board’s General Counsel of the appeal.

d to those that were made available to examination staff prior to the

date on which the written material supervisory determination was delivered to

the institution.

(3)

Distribution of Appeal. After receipt of a request for an appeal,

the Board’s Ombudsman shall promptly notify the director of the appropriate

division of the Board and the Board’s General Counsel of the appeal.

(4)

Initial Review Panel. Within ten calendar days of receipt of a

timely appeal, the director of the appropriate division of the Board or an officer

designated by the appropriate division director must appoint three Reserve

Bank employees to serve as an initial review panel to consider the appeal and

an attorney to advise the initial review panel in the exercise of its

responsibilities. In appropriate circumstances, the appropriate division director

may appoint a Board employee as one of the three members of the initial review

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panel. The members of the initial review panel and the appointed attorney must

not have been substantively involved in any matter at issue; must not directly or

indirectly report to any person(s) who made the material supervisory

determination under review; must not be employed by the Reserve Bank that

made the material supervisory determination under review; and must have

relevant experience to contribute to the review of the material supervisory

determination. An individual shall be considered to have been substantively

involved in a material supervisory determination if the individual was

personally consulted regarding the issue being determined and provided

guidance regarding how it should be resolved. The initial review panel shall

determine all procedural issues regarding the initial review.

eview of the material supervisory

determination. An individual shall be considered to have been substantively

involved in a material supervisory determination if the individual was

personally consulted regarding the issue being determined and provided

guidance regarding how it should be resolved. The initial review panel shall

determine all procedural issues regarding the initial review.

(5)

Initial Review Meeting. The initial review panel shall conduct an

informal appeal meeting if the institution requests such a meeting at the time it

files its appeal or if the panel, in its discretion, decides to hold such a meeting.

If such a meeting is to be conducted, the panel should, in consultation with the

institution, schedule a meeting for a date that is no later than 21 calendar days

after the date the appeal is received. The panel shall notify the institution in

writing of the date, time, and place of the meeting. The institution may appear

at the appeal meeting personally or through counsel to make an oral

presentation to the panel. Panel members may ask questions of any person

participating in the meeting. The institution and the Reserve Bank may not

cross-examine persons participating in the meeting. A verbatim transcript of

the meeting may be taken if the institution requests a transcript and agrees to

pay all expenses, and if the initial review panel determines that a transcript

would assist the panel in carrying out its responsibilities. The meeting provided

under this process is not governed by formal rules of evidence. No formal

discovery is required or permitted. The initial review panel may make any

rulings reasonably necessary to facilitate the effective and efficient operation of

the meeting.

, and if the initial review panel determines that a transcript

would assist the panel in carrying out its responsibilities. The meeting provided

under this process is not governed by formal rules of evidence. No formal

discovery is required or permitted. The initial review panel may make any

rulings reasonably necessary to facilitate the effective and efficient operation of

the meeting.

(6)

Record. The record of the appeal shall at a minimum include the

original material supervisory determination being appealed, the materials

submitted by the institution in connection with the appeal, and the materials

identified by Federal Reserve staff as relevant to the material supervisory

determination being appealed, including workpapers. In addition, the initial

review panel may, in its discretion, conduct additional fact finding. For

example, the initial review panel may supplement the record by soliciting the

views of outside parties, including staff from the Board, the Reserve Banks,

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other supervisory agencies (for example, in cases of joint examinations or

inspections), and the Federal Reserve staff who participated in making the

material supervisory determination being appealed. The entire record of the

appeal, including the decision of the initial review panel and any meeting

transcripts or material(s) submitted in connection with any subsequent final

review, shall be considered confidential supervisory information of the Board.

inations or

inspections), and the Federal Reserve staff who participated in making the

material supervisory determination being appealed. The entire record of the

appeal, including the decision of the initial review panel and any meeting

transcripts or material(s) submitted in connection with any subsequent final

review, shall be considered confidential supervisory information of the Board.

(7)

Standard of Review Applied by Initial Review Panel. The

initial review panel shall conduct a review of the material supervisory

determination on appeal. The panel must consider whether the Reserve Bank’s

material supervisory determination is consistent with applicable laws,

regulations, and policy, and supported by a preponderance of the evidence in

the record. In doing so, the panel shall make its own supervisory determination

and shall not defer to the judgment of the Reserve Bank staff that made the

material supervisory determination though it may rely on any examination

workpapers developed by the Reserve Bank or materials submitted by the

institution if it determines it is reasonable to do so.

(8)

Notice of Decision. Within 45 calendar days after the date the

appeal is received, the initial review panel shall provide written notice of its

decision to the senior management and the board of directors of the institution.

A copy of the decision will be provided to the director of the appropriate

division of the Board, the officer in charge of supervision at the appropriate

Reserve Bank, and the Board’s Ombudsman. The notice of decision shall

contain a statement of the basis for the initial review panel’s decision to

continue, terminate, or otherwise modify the material supervisory

determination(s) at issue or to remand consideration of the material supervisory

determination at issue to the examiners that made the determination to allow

them to consider additional evidence presented in connection with the appeal

of decision shall

contain a statement of the basis for the initial review panel’s decision to

continue, terminate, or otherwise modify the material supervisory

determination(s) at issue or to remand consideration of the material supervisory

determination at issue to the examiners that made the determination to allow

them to consider additional evidence presented in connection with the appeal.

The notice of decision shall identify the information upon which the panel

relied in reaching its conclusion, and the panel shall promptly provide that

information to the institution upon the institution’s request to the extent

permitted by law. Such request must be made within seven calendar days of

receipt of the notice of decision. The notice of decision shall also indicate that

the institution may request a final review as set forth in this subpart by filing a

written request with the Board’s Ombudsman. The initial review panel may

extend the period for issuing a decision by up to 30 calendar days if the panel

determines that the record is incomplete and additional fact-finding is necessary

for the panel to issue a decision.

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(9)

Use of Confidential Supervisory Information. If the Reserve

Bank or the Board has confidential supervisory information from another

regulated institution that is pertinent to the appeal, they may elect to use that

information, provided that the information is entered into the record for the

appeal and provided to the appealing institution, subject to limitations on

disclosure, including those imposed by the Board’s applicable regulations,2 and

redaction of all information not relevant to the appeal.

rmation from another

regulated institution that is pertinent to the appeal, they may elect to use that

information, provided that the information is entered into the record for the

appeal and provided to the appealing institution, subject to limitations on

disclosure, including those imposed by the Board’s applicable regulations,2 and

redaction of all information not relevant to the appeal.

(10) Request for Final Review. Within 14 calendar days after notice

of decision by the initial review panel, the institution, at the direction of its

board of directors or senior management in consultation with the board of

directors, may appeal that decision to a final review panel by filing a written

request for final review with the Board’s Ombudsman, with a copy to the

officer in charge of supervision at the appropriate Reserve Bank. Senior

management shall inform the board of directors of the substance of the appeal

before filing the appeal and shall keep the board of directors informed of the

status of the appeal. The request for final review must state all the reasons,

legal and factual, the institution disagrees with the initial review panel’s

decision. The institution may file a written request for an extension of the time

to file an appeal with the Ombudsman, which request shall state good cause for

granting the extension. The decision to grant such a request shall be in the sole

discretion of the director of the appropriate division of the Board in consultation

with the Board’s General Counsel or his designee.

(11) Waiver of Final Review. Failure to timely request final review in

a manner consistent with this process shall constitute a waiver of the

opportunity for final review, and the decision of the initial review panel shall

constitute a final and unappealable material supervisory determination.

ropriate division of the Board in consultation

with the Board’s General Counsel or his designee.

(11) Waiver of Final Review. Failure to timely request final review in

a manner consistent with this process shall constitute a waiver of the

opportunity for final review, and the decision of the initial review panel shall

constitute a final and unappealable material supervisory determination.

(12) Distribution of Final Review Request. After receipt of a request

for final review, the Board’s Ombudsman shall promptly notify the director of

the appropriate division of the Board and the Board’s General Counsel of the

request for final review.

(13) Final Review Panel. When an institution files a request for final

review, the director of the appropriate division of the Board shall promptly

2 See 12 CFR 261.20.

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appoint three individuals to serve as a final review panel to permit completion

of the appeal within the applicable period. The final review panel shall include

at least two Board employees, at least one of whom must be an officer of the

Board at the level of associate director or higher. The Board’s General Counsel

shall appoint an attorney to advise the final review panel in the exercise of its

responsibilities. The members of the final review panel and the appointed

attorney must not be employed by the Reserve Bank that made the material

supervisory determination under review; must not have been members of the

initial review panel; and must not have been personally consulted regarding the

issue being determined and provided guidance regarding how it should be

resolved, or directly or indirectly report to the person(s) who made the material

supervisory determination under review. The final review panel shall determine

all procedural issues regarding the final review.

t not have been members of the

initial review panel; and must not have been personally consulted regarding the

issue being determined and provided guidance regarding how it should be

resolved, or directly or indirectly report to the person(s) who made the material

supervisory determination under review. The final review panel shall determine

all procedural issues regarding the final review.

(14) Final Review Meeting. The final review panel may determine in

its discretion to have an informal appeal meeting at which a representative of

the institution or counsel may appear personally to make an oral presentation to

the panel. No facts may be introduced in this meeting that are not contained in

the record upon which the initial review panel made its decision. In the event

the panel decides to have a meeting with the appealing institution, panel

members may ask questions of any person participating in the meeting. The

institution may not cross-examine persons participating in the meeting. A

verbatim transcript of the meeting may be taken at the cost of the Board if the

final review panel determines that a transcript would assist the panel in carrying

out its responsibilities. A meeting provided under this process is not governed

by formal rules of evidence. No formal discovery is required or permitted. The

final review panel may make any procedural rulings reasonably necessary to

facilitate the effective and efficient operation of the meeting.

(15) Scope of Final Review. The scope of the final review shall be

confined to the record upon which the initial review panel made its decision.

rocess is not governed

by formal rules of evidence. No formal discovery is required or permitted. The

final review panel may make any procedural rulings reasonably necessary to

facilitate the effective and efficient operation of the meeting.

(15) Scope of Final Review. The scope of the final review shall be

confined to the record upon which the initial review panel made its decision.

(16) Standard of Review of Final Review. The final review panel

shall determine whether the decision of the initial review panel is reasonable.

In reaching this determination, the panel should consider whether the decision

was based on a consideration of the applicable law, regulations, and policy, and

whether there has been a clear error of judgment. The final review panel may

affirm the decision of the initial review panel even if it is possible to draw a

contrary conclusion from the record presented on appeal.

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(17) Notice of Final Review Decision. Within 21 calendar days of the

filing of a request for final review, the director of the appropriate division of the

Board shall provide written notice of the decision of the final review panel to

the senior management and the board of directors of the institution. The final

review panel may continue, terminate, or otherwise modify the material

supervisory determination(s) at issue or remand consideration of the material

supervisory determination at issue to the examiners who made the

determination to allow them to consider additional evidence presented in

connection with the appeal. The notice of decision shall contain a statement of

the basis for the final review panel’s decision. A copy of the decision will be

provided to the director of the appropriate division of the Board, the officer in

charge of supervision at the appropriate Reserve Bank, and the Board’s

Ombudsman

termination to allow them to consider additional evidence presented in

connection with the appeal. The notice of decision shall contain a statement of

the basis for the final review panel’s decision. A copy of the decision will be

provided to the director of the appropriate division of the Board, the officer in

charge of supervision at the appropriate Reserve Bank, and the Board’s

Ombudsman. A copy of the decision will be published on the Board’s public

website as soon as practicable, and the published decision will be redacted to

avoid disclosure of exempt information. In cases in which redaction is deemed

insufficient to prevent improper disclosure, the published decision may be

presented in summary form. The final review panel may extend the period for

issuing a decision by up to 30 calendar days if the panel determines that, based

on the facts and circumstances of the appeal, an extension is appropriate.

(18) Ombudsman Participation. The Board’s Ombudsman may

attend, as an observer, meetings or deliberations relating to the appeal at either

level if requested by either the institution or System personnel. The

Ombudsman will not have substantive involvement in or act as a decision-

maker with respect to the appeal.

C.

Expedited Procedures for Appealing a Material Supervisory

Determination

When a material supervisory determination relates to or causes an

institution to become critically undercapitalized, as defined by section 38 of the

FDI Act, the review of any appeal of that supervisory determination will be

processed on an expedited basis.

Notwithstanding any other provision in this process, a matter processed

under expedited review will be subject to the same policies that govern all

appeals except that the initial review panel will issue a decision within 35

cally undercapitalized, as defined by section 38 of the

FDI Act, the review of any appeal of that supervisory determination will be

processed on an expedited basis.

Notwithstanding any other provision in this process, a matter processed

under expedited review will be subject to the same policies that govern all

appeals except that the initial review panel will issue a decision within 35

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calendar days following the date the appeal is received (such period may be

extended by up to an additional 7 calendar days if the initial review panel

decides that such time is required to supplement the record and to consider any

additional information received), the institution shall have 7 days to file an

appeal of the initial review panel’s decision, and the final review panel will

issue a decision within 10 calendar days.

D.

Effect of Appeal on Material Supervisory Determinations

A material supervisory determination shall remain in effect while under

appeal unless and until such time as it is modified or terminated through the

appeals process. An appeal does not prevent or suspend the Federal Reserve or

any other appropriate agency from taking any supervisory or enforcement

action–either formal or informal–it deems appropriate to discharge the agency’s

supervisory responsibilities. In such cases, the rights of appeal provided for in

the statutes and regulations concerning those actions shall govern.

In addition, an appeal does not prevent or suspend the operation of the

PCA framework under section 38 of the FDI Act, prevent or suspend an

appropriate authority from appointing a receiver for the institution or otherwise

causing the closure of an institution, or prevent or suspend an appropriate

authority from taking any other action under the PCA framework. If the

institution is placed into receivership while an appeal is outstanding, the appeal

will be considered moot and will not be completed.

E

ct, prevent or suspend an

appropriate authority from appointing a receiver for the institution or otherwise

causing the closure of an institution, or prevent or suspend an appropriate

authority from taking any other action under the PCA framework. If the

institution is placed into receivership while an appeal is outstanding, the appeal

will be considered moot and will not be completed.

E.

Safeguards Against Retaliation

Neither the Federal Reserve nor any employee of the Federal Reserve

may retaliate against an institution or person, including based on the filing or

outcome of an appeal under this process. In accordance with longstanding

Federal Reserve practice, the appeals framework is intended to foster an

environment where concerns and issues may be freely and openly discussed.

Each Reserve Bank shall provide institutions with notice of the Board’s

anti-retaliation policy in connection with each Federal Reserve led examination.

An institution that believes that it has suffered retaliation or any other

form of unfair treatment is encouraged to contact the appropriate Reserve Bank,

and may file a claim of retaliation with the Board’s Ombudsman. The

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Ombudsman may attempt to resolve a claim of retaliation informally by

engaging in discussions with the concerned institution and the appropriate

Board or Reserve Bank staff.

Nothing in this guidance is intended to prevent the Ombudsman from

initiating a factual inquiry into alleged retaliation at any time. The Ombudsman

may initiate a factual inquiry into a claim of retaliation, at any time, by

providing notice to the director of the appropriate division of the Board and

appropriate Board committee, and the officer in charge of supervision at the

appropriate Reserve Bank. As part of the inquiry, the Ombudsman may collect

and review documents, interview witnesses, and consult Board and Reserve

Bank staff with subject matter expertise

uiry into a claim of retaliation, at any time, by

providing notice to the director of the appropriate division of the Board and

appropriate Board committee, and the officer in charge of supervision at the

appropriate Reserve Bank. As part of the inquiry, the Ombudsman may collect

and review documents, interview witnesses, and consult Board and Reserve

Bank staff with subject matter expertise. The Ombudsman also may request

that the director of the appropriate division of the Board authorize or assign

such additional resources as necessary to assist the Ombudsman in fully

reviewing the matter.

Upon the completion of a factual inquiry into a claim of retaliation, if the

Ombudsman concludes that retaliation has occurred, the Ombudsman will

forward the claim of retaliation, along with the Ombudsman’s factual findings

to the director of the appropriate division of the Board. These officials will take

appropriate action consistent with the Board’s or relevant Reserve Bank’s

policies and procedures to resolve the matter. In addition, to prevent future

retaliation for an appeal, the Ombudsman may recommend to the director of the

appropriate division of the Board that the next examination of the institution or

review that may lead to a material supervisory determination exclude personnel

involved in the claim of retaliation. The division director(s) will make the final

decision as to whether any examination staff should be excluded.

The Board’s Ombudsman will contact institutions within six months after

a material supervisory determination appeal has been decided to inquire

whether the institution believes retaliation has occurred.

F.

Availability of Procedures

The Federal Reserve, through the Board and Reserve Banks, shall make

this process readily available on its public website and to any member of the

public who requests it.

an will contact institutions within six months after

a material supervisory determination appeal has been decided to inquire

whether the institution believes retaliation has occurred.

F.

Availability of Procedures

The Federal Reserve, through the Board and Reserve Banks, shall make

this process readily available on its public website and to any member of the

public who requests it.

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Ombudsman for the Federal Reserve System

Policy Statement

Section 309 of the Riegle Community Development and Regulatory

Improvement Act of 1994, 12 U.S.C. 4806, requires each of the Federal

banking agencies to appoint an Ombudsman. Section 309 provides that the

Ombudsman:

(1) Is to act as a liaison between the agency and any affected person with

respect to any problem such party may have in dealing with the agency

resulting from the regulatory activities of the agency; and

(2) Is to assure that safeguards exist to encourage complainants to come

forward and preserve confidentiality.

Mission of the Ombudsman. The Ombudsman is charged with performing

three major functions: (1) serving as a facilitator and moderator for the fair and

timely resolution of complaints related to the Federal Reserve System’s

regulatory activities; (2) reporting to the Board on issues that are likely to have

a significant impact on the Federal Reserve System’s missions, activities, or

reputation that arise from the Ombudsman’s review of complaints, such as

patterns of issues that occur in multiple complaints; and (3) receiving,

reviewing, and deciding claims of retaliatory conduct by Federal Reserve

System staff. The Ombudsman also serves as the initial recipient for appeals of

material supervisory determinations and plays a role in resolving appeals of

some consumer complaints. In addition, the Ombudsman ensures that

safeguards exist to encourage complainants to come forward and to protect

confidentiality.

Serving as a Complaint Facilitator

of retaliatory conduct by Federal Reserve

System staff. The Ombudsman also serves as the initial recipient for appeals of

material supervisory determinations and plays a role in resolving appeals of

some consumer complaints. In addition, the Ombudsman ensures that

safeguards exist to encourage complainants to come forward and to protect

confidentiality.

Serving as a Complaint Facilitator. The Ombudsman assists institutions with

issues and questions related to Reserve Bank or Board regulatory activities. In

doing so, the Ombudsman shall operate independently of the supervisory

process to the extent necessary to ensure that appropriate safeguards exist to

encourage complainants to come forward and preserve confidentiality.

In situations where the Board has not established a process for addressing a

certain type of question or complaint, the Ombudsman is available to facilitate

the resolution of the question or complaint. Although the Ombudsman does not

Page 12 of 16

have decision-making authority regarding any substantive matters, including

supervisory determinations and regulatory action (other than for retaliation

claims), the Ombudsman is available to assist institutions, and particularly

community banks, in locating the correct Federal Reserve System staff person

to address or resolve such a question or complaint and may coordinate meetings

and facilitate discussions between the institution and System staff, including

senior officials, as necessary. In order to facilitate this process, the

Ombudsman may investigate the situation in order to identify the relevant facts

and circumstances. The Ombudsman may also participate in meetings or

discussions related to the matter if requested by either the institution or System

staff, and may require updates from System staff, as appropriate, until the

matter is resolved

officials, as necessary. In order to facilitate this process, the

Ombudsman may investigate the situation in order to identify the relevant facts

and circumstances. The Ombudsman may also participate in meetings or

discussions related to the matter if requested by either the institution or System

staff, and may require updates from System staff, as appropriate, until the

matter is resolved. If the Ombudsman believes such a complaint has not been

satisfactorily addressed, the Ombudsman may raise the matter with the

appropriate division director or Board committee, as appropriate.

When an issue is brought to the attention of the Ombudsman for which the

Board’s rules or procedures provide an avenue of appeal or another appropriate

forum for resolution, the Ombudsman will explain the process to the

complaining party, and direct the party to the appropriate appeals process or

forum for the complaint.3 In addition, the Ombudsman is also available to

facilitate informal discussions between a potential appellant and the appropriate

Reserve Bank or Board staff in order to explore solutions before an appeal is

filed. Such discussions do not stay or otherwise alter any of the deadlines under

the Board’s rules or procedures.

The Ombudsman will serve as the initial recipient for an appeal of a material

supervisory determination and may attend, as an observer, meetings or

deliberations relating to the appeal if requested by either the institution or

System personnel. In any event, the Ombudsman will not have any substantive

involvement in or act as a decision-maker with respect to the appeal

rules or procedures.

The Ombudsman will serve as the initial recipient for an appeal of a material

supervisory determination and may attend, as an observer, meetings or

deliberations relating to the appeal if requested by either the institution or

System personnel. In any event, the Ombudsman will not have any substantive

involvement in or act as a decision-maker with respect to the appeal.

3 For example, the Ombudsman may explain some of the existing mechanisms for resolutions

of complaints, such as: material supervisory determinations pursuant to section 309(a) of the

Riegle Act; actions delegated to the Reserve Banks or Board staff pursuant to 12 CFR Part

265; prompt corrective action directives under section 38 of the FDI Act; denials or partial

denials of Freedom of Information or Privacy Act requests; issuance of capital directives

pursuant to 12 CFR 263.80-263.85; decisions with respect to applications; and matters within

the jurisdiction of the Board's Inspector General or Federal or State investigatory or

prosecutorial authorities.

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Providing Feedback on Patterns of Issues. The Ombudsman is in a unique

position to identify and report patterns of issues arising from complaints related

to Reserve Bank or Board regulatory activities. The Ombudsman will track

inquiries and complaints based on relevant characteristics, such as geographic

location, scope, policy implications, and final disposition, to help identify any

such trends, including trends that implicate differently sized institutions

disproportionately. This tracking will be conducted in a manner designed to

preserve confidentiality of the complainant to the maximum extent possible. As

appropriate, the Ombudsman will report findings of patterns of issues to the

appropriate Board committee or division director and Reserve Bank or Board

staff

any

such trends, including trends that implicate differently sized institutions

disproportionately. This tracking will be conducted in a manner designed to

preserve confidentiality of the complainant to the maximum extent possible. As

appropriate, the Ombudsman will report findings of patterns of issues to the

appropriate Board committee or division director and Reserve Bank or Board

staff. The Ombudsman will also report any issue stemming from a complaint

that is likely to have a significant impact on the Federal Reserve System’s

mission, activities, or reputation.

Retaliation Claims by Supervised Persons. The Board does not tolerate

retaliation by Federal Reserve System staff against a supervised institution or its

employees (“supervised persons”). Retaliation is defined as any action or

decision by Reserve Bank or Board staff that causes a supervised person to be

treated differently or more harshly than other similarly situated institutions

because the supervised person attempted to resolve a complaint by filing an

appeal of a material supervisory determination or utilized any other Board

mechanisms for resolving complaints. Retaliation includes, but is not limited

to, delaying or denying action that might benefit a supervised person without a

sound supervisory reason or subjecting a supervised institution to heightened

examination standards without a sound supervisory reason.

The Ombudsman is authorized to receive, review, and determine the merits of

complaints of retaliatory conduct by Reserve Bank or Board staff. The

Ombudsman may attempt to resolve retaliation claims informally by engaging

in discussions with the concerned supervised person and the appropriate Board

or Reserve Bank staff. If a complaint cannot be resolved informally, the

Ombudsman may initiate a full investigation into the underlying facts and

circumstances

erits of

complaints of retaliatory conduct by Reserve Bank or Board staff. The

Ombudsman may attempt to resolve retaliation claims informally by engaging

in discussions with the concerned supervised person and the appropriate Board

or Reserve Bank staff. If a complaint cannot be resolved informally, the

Ombudsman may initiate a full investigation into the underlying facts and

circumstances.

To commence a factual investigation of a complaint of retaliatory conduct, the

Ombudsman should provide written notice to the appropriate Board committee

and division director and the appropriate Reserve Bank officer in charge of

supervision. As part of the investigation, the Ombudsman may, among other

things, collect and review documents, interview witnesses, and seek any other

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relevant information. The Ombudsman may also consult Board and Reserve

Bank staff with subject matter expertise. Where necessary, the appropriate

Board committee or division director may authorize or assign such additional

resources as may be needed to assist the Ombudsman in fully reviewing the

matter.

Upon completion of the factual investigation of a complaint of retaliatory

conduct, the Ombudsman will decide whether a member of Federal Reserve

System staff retaliated, as defined above. The Ombudsman will report this

determination to the appropriate Board committee or Governor and division

director and the appropriate Reserve Bank officer in charge of supervision and

may make recommendations for resolution of the matter to those parties. In

addition, to prevent future retaliation for an appeal, the Ombudsman may

recommend to the appropriate division director(s) that the next examination of

the institution or review that may lead to a material supervisory determination

exclude personnel involved in the claim of retaliation. The division director(s)

will make the final decision as to whether any examination staff should be

excluded

ddition, to prevent future retaliation for an appeal, the Ombudsman may

recommend to the appropriate division director(s) that the next examination of

the institution or review that may lead to a material supervisory determination

exclude personnel involved in the claim of retaliation. The division director(s)

will make the final decision as to whether any examination staff should be

excluded. However, the Ombudsman shall not make recommendations

regarding disciplinary action against a Federal Reserve System staff member.

The appropriate staff will consider further action consistent with the Board’s

and relevant Reserve Bank’s policies and procedures. The Ombudsman’s

determination regarding retaliation will be communicated in writing to the

supervised person.

To further ensure that supervised persons are not subjected to retaliation, as

defined above, the Ombudsman will contact a supervised institution within six

months after an appeal has been decided to inquire whether the institution

believes retaliation occurred. Where possible, the Ombudsman will also

contact the institution after the next examination following an appeal. In the

event an institution complains of retaliation, the Ombudsman will initiate the

process outlined above to informally review the matter or initiate a factual

investigation.

Consumer Complaints and Appeals. Independent of the Ombudsman

function, the Federal Reserve System operates a consumer complaint and

inquiry program to assist members of the public who are experiencing problems

with their financial institution. If the Ombudsman receives a consumer

complaint directly, the Ombudsman will refer the complaint to the Board’s

Division of Consumer and Community Affairs (“DCCA”) to determine

als. Independent of the Ombudsman

function, the Federal Reserve System operates a consumer complaint and

inquiry program to assist members of the public who are experiencing problems

with their financial institution. If the Ombudsman receives a consumer

complaint directly, the Ombudsman will refer the complaint to the Board’s

Division of Consumer and Community Affairs (“DCCA”) to determine

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handling and send appropriate consumer complaints to the Federal Reserve

Consumer Help Center (“FRCH”) for processing.

A request for an independent review of a consumer complaint previously

investigated by a Reserve Bank is treated as an appeal. Consumers should be

advised that they can file an appeal through FRCH or with the Ombudsman if

the consumer requests confidential treatment of the appeal or prefers that the

Ombudsman handle the appeal.

If an appeal is received by the Ombudsman, he or she will consult with DCCA

to determine who will handle the appeal, unless the consumer has requested

confidential treatment or that the Ombudsman’s Office handle the appeal. In

many instances, DCCA will be responsible for investigating and responding to

the appeal. For the appeals referred to DCCA by the Ombudsman, DCCA will

consult with the Ombudsman during the appeal investigation to help ensure that

the matter is fully and fairly addressed and provide a final copy of the response

letter to the Ombudsman.

The Ombudsman handles appeals seeking further investigation of DCCA’s

handling of an initial appeal, appeals where the consumer requests confidential

treatment, and appeals where the consumer requests that the Ombudsman’s

Office handle the initial appeal. The Ombudsman may handle other appeals, as

determined in collaboration with DCCA. The Ombudsman will send an

acknowledgement letter for each appeal it receives

appeals seeking further investigation of DCCA’s

handling of an initial appeal, appeals where the consumer requests confidential

treatment, and appeals where the consumer requests that the Ombudsman’s

Office handle the initial appeal. The Ombudsman may handle other appeals, as

determined in collaboration with DCCA. The Ombudsman will send an

acknowledgement letter for each appeal it receives.

With respect to appeals seeking further investigation of DCCA’s handling of an

initial appeal or where the consumer requests that the Ombudsman handle the

appeal, the Ombudsman will typically consult with DCCA during the

investigation. For appeals where the consumer requests confidential treatment,

the Ombudsman typically will not consult with DCCA during the investigation.

For all appeals the Ombudsman handles, the Ombudsman will review the

matter. In doing so, the Ombudsman will collect and review the complaint

documents from DCCA and seek any other relevant information, unless

confidential treatment is requested. The Ombudsman may also consult Board

and Reserve Bank staff to discuss the details of the previous complaint

investigations. The Ombudsman is responsible for responding to the

complainant with its determination. As appropriate, the Ombudsman will

contact the appropriate Board division director and Reserve Bank staff with

feedback or concerns.

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Safeguards. These policies, processes, and practices are intended as safeguards

to encourage complainants to come forward with issues or complaints related to

the Federal Reserve System’s supervisory activities.

To the extent possible, the Ombudsman will honor requests to keep confidential

the identity of a complaining party. It must be recognized, however, that it may

not be possible for the Ombudsman to resolve certain complaints, including

complaints of retaliation, if the Ombudsman cannot disclose the identity of the

complaining party to other members of Federal Reserve staff.

Procedures

ies.

To the extent possible, the Ombudsman will honor requests to keep confidential

the identity of a complaining party. It must be recognized, however, that it may

not be possible for the Ombudsman to resolve certain complaints, including

complaints of retaliation, if the Ombudsman cannot disclose the identity of the

complaining party to other members of Federal Reserve staff.

Procedures. A party may contact the Ombudsman at any time regarding

concerns or issues resulting from the regulatory activities of the Board or the

Reserve Banks by calling 1-800-337-0429, by sending a fax to 202-530-6208,

by writing to the Office of the Ombudsman, Board of Governors of the Federal

Reserve System, Washington, D.C. 20551, or by sending an email to

Ombudsman@frb.gov.

By order of the Board of Governors of the Federal Reserve System, March 12, 2020.

/s/Ann Misback,

Secretary of the Board.