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FDIC proposes signage amendments, issues revised guide on supervisory appeals process
On December 13, the FDIC held a meeting, during which board members approved a notice of proposed rulemaking (NPRM) to modernize and amend the rules “governing the use of the official FDIC sign and insured depository institutions’ (IDIs) advertising statements to reflect how depositors do business with IDIs today, including through digital and mobile channels.” According to the FDIC’s announcement, the NPRM would amend part 328 of its regulations by updating the requirements for when the FDIC’s official sign can be displayed. Institutions would also be required to use signs that differentiate insured deposits from non-deposit products across banking channels and provide disclosures to consumers alerting them to when certain financial products are not insured by the FDIC, are not considered deposits, and may lose value.
Acting Chairman Martin Gruenberg noted that there have not been major changes to these rules since 2006. FDIC board member and CFPB Director Rohit Chopra issued a statement in support of the NPRM, noting that the financial sector has evolved significantly since 2006, and “[b]anks increasingly offer uninsured products, physical branches look different, more than 65% of banked households primarily bank online or through their mobile phone, and convoluted bank-nonbank partnerships have proliferated.” He specifically highlighted several of the proposed changes, including: (i) requiring banks to physically segregate the parts of the branch used for accepting insured deposits from other areas where uninsured products are offered; (ii) requiring banks to display digital FDIC signs on their websites and mobile apps, including clear notifications on relevant pages where uninsured products are offered; (iii) requiring disclosures that deposit insurance does not protect against the failure of nonbanks and, if relevant, that pass-through deposit insurance coverage is not automatic or certain; and (iv) clarifying that crypto assets are uninsured, non-deposit products. Comments on the NPRM are due 60 days after publication in the Federal Register.
On the same day, the FDIC adopted proposed changes to the Guidelines for Appeals of Material Supervisory Determinations. The board solicited public comments in October on the proposed changes (covered by InfoBytes here). The revised Guidelines add the agency’s ombudsman to the Supervision Appeals Review Committee (SARC) as a non-voting member (the ombudsman will be responsible for monitoring the supervision process after a financial institution submits an appeal and must periodically report to the board on these matters). Materials under consideration by the SARC will have to be shared with both parties to the appeal (subject to applicable legal limitations on disclosure), while financial institutions will be allowed to request a stay of material supervisory determination during a pending appeal. Additionally, the division director is given the discretion to grant a stay or grant a stay subject to certain conditions, and institutions will be provided decisions in writing regarding a stay. The revised Guidelines take effect immediately.
FDIC reinstates SARC as final review in supervisory appeals
On May 17, the FDIC adopted revised Guidelines for Appeals of Material Supervisory Determinations to reinstate the Supervision Appeals Review Committee (SARC) as the final level of review in the agency’s supervisory appeals process. The SARC’s restoration appears to eliminate the independent Office of Supervisory Appeals, which was created and staffed in 2021. The Office of Supervisory Appeals was designed to have final authority to resolve appeals by a panel of reviewing officials and be independent from other divisions within the FDIC that have authority to issue material supervisory determinations (covered by InfoBytes here).
According to the revised guidelines, the SARC will include one inside member of the FDIC’s Board of Directors (serving as chairperson); a deputy or special assistant to each of the other inside board members; and the general counsel as a non-voting member. The guidelines provide a list of material supervisory determinations, including CAMELS, IT, trust, and CRA ratings; consumer compliance ratings; loan loss reserve provision determinations; TILA restitutions; and decisions to initiate informal enforcement actions (such as memoranda of understanding).
The guidelines apply to all FDIC-supervised financial institutions, including state nonmember banks, industrial banks, and insured U.S. branches of non-U.S. banks.
While public comments from industry had supported an independent supervisory appeals process, the revised guidelines are posted in final (not draft) form on the FDIC’s website, with the FIL asserting that the guidelines take effect May 17 (before the comment period concludes on June 21). The notice and request for comments was published in the Federal Register on May 20.