[Federal Register Volume 59, Number 245 (Thursday, December 22, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31545]


[[Page Unknown]]

[Federal Register: December 22, 1994]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency
[Docket No. 94-23]

 

Independent Regulatory Appeals Process

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

Action: Notice and request for comments.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
requesting comments on its guidelines that permit national banks to 
appeal certain OCC decisions and actions. This Action is required by 
the Riegle Community Development and Regulatory Improvement Act of 
1994. The OCC intends to use the comments in evaluating whether changes 
to the proposed guidelines are appropriate.

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

ADDRESSES: Comments may be submitted to Docket Number 94-23, 
Communications Division, Ninth Floor, Office of the Comptroller of the 
Currency, 250 E Street, SW., Washington, DC 20219. Comments will be 
available for inspection and photocopying at that address.

FOR FURTHER INFORMATION CONTACT: Heidi Thomas, Legislative Counsel, 
Legislative and Regulatory Activities Division, 202-874-5090, or P. 
Michael Yuenger, Office of the Chief National Bank Examiner, 202-874-
5350, Office of the Comptroller of the Currency.

SUPPLEMENTARY INFORMATION:

Background

    Section 309(a) of the Riegle Community Development and Regulatory 
Improvement Act of 1994, Pub. L. 103-325 (12 U.S.C. 4806) (the Act), 
which was signed into law on September 23, 1994, requires the OCC, the 
Office of Thrift Supervision, the Federal Deposit Insurance 
Corporation, and the Federal Reserve Board (Federal banking agencies) 
and the National Credit Union Administration to establish an 
independent internal appellate process. This process must be available 
to review material supervisory determinations made at insured 
depository institutions or credit unions that the agency supervises. 
Section 309(c) of the Act (12 U.S.C. 4806(c)) requires that each 
Federal banking agency must provide public notice and opportunity for 
comment on its proposed guidelines for this appellate process by 
December 22, 1994, and establish this process by March 22, 1995.
    The Act defines ``independent appellate process'' in section 
309(f)(2) (12 U.S.C. 4806(f)(2)) as a review by an agency official who 
does not directly or indirectly report to the agency official who made 
the material supervisory determination under review. In addition, this 
Act defines ``material supervisory determinations'' in section 
309(f)(1) (12 U.S.C. 4806(f)(1)) to include determinations relating to 
(1) examination ratings, (2) the adequacy of loan loss reserve 
provisions, and (3) loan classifications on loans that are significant 
to an institution. This definition expressly excludes determinations to 
appoint a conservator or receiver for an insured depository institution 
or a decision to take prompt corrective action pursuant to section 38 
of the Federal Deposit Insurance Act (FDI Act) (12 U.S.C. 1831o).
    In addition, section 309(g) (12 U.S.C. 4806(g)) expressly provides 
that the Act's requirement to establish an appeals process does not 
affect the authority of the banking agencies to take enforcement or 
supervisory actions against an institution. Finally, section 309(b) (12 
U.S.C. 4906(b)) of the Act requires that appeals be heard and decided 
expeditiously and that appropriate safeguards exist for protecting the 
appellant from retaliation by agency examiners.

Existing OCC Appeals Process

    The OCC's existing procedures for national banks to appeal agency 
decisions and actions were published in Banking Circular No. 272, dated 
June 11, 1993. These procedures have been modified and clarified in the 
proposed guidelines to be consistent with the requirements of the Act. 
Until these guidelines are published in final form in the Federal 
Register, the current OCC appeals policy as set forth in Banking 
Circular No. 272 remains in effect. The OCC's appeals policy does not 
supersede any existing appeals procedures available under current law.
    The OCC's appeals process provides that a national bank may file 
its appeal either with the District Administrator or Deputy Comptroller 
of the OCC District in which the bank is headquartered (or the Deputy 
Comptroller for the appropriate program in Washington, D.C. if the bank 
is a multinational bank or under special supervision), or directly with 
the Ombudsman. The proposed guidelines clarify that the term national 
bank includes a Federal branch or agency of a foreign bank.
    The District Administrator or Deputy Comptroller normally does not 
directly or indirectly participate in making reviewable supervisory 
decisions nor report directly or indirectly to the agency official who 
made the reviewable decision. In addition, the national bank may always 
file its appeal with the Ombudsman who is outside the bank supervision 
area, reporting only to the Comptroller. Therefore, the OCC believes 
that its appeals process complies with the Act's requirement that 
appeals be heard by an agency official who does not report directly or 
indirectly to the agency official who made the material supervisory 
determination under review.
    However, to further assure that the appeals process remains 
completely independent, the OCC has added a provision to require the 
District Administrator or Deputy Comptroller to transfer an appeal to 
the Ombudsman if the District Administrator or Deputy Comptroller 
directly or indirectly participated in making the decision under review 
or reports directly or indirectly to the agency official who made the 
decision under review. In addition, the OCC has added a provision to 
require the Ombudsman to transfer an appeal to the Senior Deputy 
Comptroller for Bank Supervision Policy if the Ombudsman should be 
recused from reviewing the decision under appeal.
    The OCC also is proposing to extend the period of time in which the 
District Administrator, Deputy Comptroller, or Ombudsman must make a 
decision on an appeal. Currently, the OCC's policy requires that the 
District Administrator or the Deputy Comptroller, in the absence of any 
extenuating circumstances, issue a written response within 20 calendar 
days of the filing of an appeal, and that the Ombudsman issue a written 
response within 30 calendar days of the filing of an appeal. In 
addition, the Ombudsman must issue a written response to a second-tier 
appeal, which is an appeal by a national bank of an appeal decision 
made by a District Administrator or Deputy Comptroller, within 15 
calendar days of the filing of that second-tier appeal. The OCC is 
proposing to extend the time period for deciding all first-tier appeals 
to 45 days, and all second-tier appeals to 30 days. Based on the OCC's 
current experience with the appeals process, it has found that some 
additional time may be necessary. The OCC believes that the time 
periods in the proposed guidelines complies with the Act's requirement 
that an appeal be heard and decided expeditiously.
    The Act also requires that the appeals process contain appropriate 
safeguards for protecting the appellant from retaliation by agency 
examiners. Currently, the OCC takes steps to ensure that banks are not 
unfairly treated because of their appeal, although these steps are not 
part of the OCC's written appeals process. Specifically, the Ombudsman 
makes periodic informal inquiries after a decision on an appeal is made 
to determine whether the bank believes the OCC has taken action against 
it in retaliation for its appeal. If a bank indicates that such 
retaliatory action has occurred, the Ombudsman initiates an 
investigation.
    To ensure that these procedures are followed for each appeal, the 
OCC proposes to include the Ombudsman's follow-up-inquiries in its 
guidelines. Specifically, the OCC proposes that the Ombudsman contact 
the appellant bank to inquire whether the bank believes that OCC 
examiners have taken actions against it in retaliation for its appeal 
within (1) six months after the date the Ombudsman, Deputy 
Administrator or Deputy Comptroller issues a final written response to 
an appeal, and (2) six months after the date of completion of the first 
examination following an appeal. In addition, national banks that 
believe they are the subject of retaliation because of their appeal 
may, at any time, seek redress with the Ombudsman.
    Finally, the OCC proposes to change its definition of appealable 
matters to expressly comply with the definition of ``material 
supervisory determinations'' as provided in section 309(f)(1) of the 
Act (12 U.S.C. 4806(f)(1)). The OCC's current process permits national 
banks to seek review of all agency decisions and actions except those 
involving the appointment of receivers and conservators. Also expressly 
excluded are preliminary examination conclusions communicated to the 
national bank prior to the issuance of either a Final Report of 
Examination or other written communication from the OCC. The OCC 
believes that, until these preliminary conclusions become final, they 
are not ``material supervisory determinations'' for purposes of the 
appellate procedures. Also, consistent with the Act, the OCC proposes 
to continue to exclude enforcement-related actions or decisions from 
actions covered by the guidelines. The OCC proposes to clarify that 
enforcement-related actions include decisions to take prompt corrective 
action pursuant to section 38 of the FDI Act (12 U.S.C. 1831o) and, 
thus, are not appealable under these guidelines.
    To be consistent with the Act, the OCC proposes to add the 
definition of ``material supervisory determination'' to its discussion 
of appealable matters. The OCC appeals policy still includes decisions 
and actions in addition to those specifically identified by the Act as 
material supervisory determinations, unless otherwise excluded.

Issues for Comment

    The OCC requests comments on all aspects of its appeals process. In 
particular, the OCC requests comments on the following issues:
    1. Do the guidelines adequately provide independence in the appeals 
process?
    2. Do the guidelines adequately provide that appeals are heard and 
decided expeditiously?
    3. Do the guidelines adequately protect appellant banks from 
retaliation by OCC examiners?
    4. Is the scope of appealable matters appropriate?
    5. To what extent should the Ombudsman be bound by existing OCC 
policies?

National Bank Appeals Process

    The following is the OCC's Proposed Appeals Process:

I. Policy

    The OCC is responsible for fostering the safety and soundness of 
the national banking system, monitoring, and enforcing national banks' 
compliance with laws, and encouraging competitiveness, integrity, and 
stability of financial services. In fulfilling this mission, it is the 
OCC's policy to maintain open and ongoing communication with the 
institutions it supervises and to foster the fair and equitable 
administration of the supervisory process.
    If a disagreement arises during the supervisory process, the OCC 
will resolve the dispute fairly and expeditiously in an informal, 
amicable manner. If disagreements cannot be resolved through informal 
discussions, national banks and Federal branches and agencies of 
foreign banks (collectively referred to as ``national banks'' for 
purposes of these guidelines) are encouraged, and the examiner involved 
in the dispute should specifically encourage the national bank, to seek 
a further review of the OCC decisions or actions that are in dispute.
    These guidelines establish a mechanism through which a national 
bank can seek such a review. A critical element in this appeals process 
is the Ombudsman. The Ombudsman is outside the bank supervision area 
and reports directly to the Comptroller of the Currency. With the prior 
consent of the Comptroller, the Ombudsman may supersede any agency 
decision or action during the resolution of an appealable matter.
    The procedures established in these guidelines provide national 
banks a fair and expeditious review of agency decisions and actions 
while ensuring that no one is disadvantaged by the filing of an appeal. 
If a national bank has a question as to whether it should make use of 
this appeal authority, it should contact the Ombudsman.

II. Procedures

A. Filing An Appeal
    A national bank may seek review of appealable matters by filing an 
appeal with either its immediate supervisory office or with the OCC's 
Ombudsman. All communications with the Ombudsman may be sent to 1000 
Louisiana Street, Suite 950, Houston, Texas 77002-5008. The choice of 
where to file is a matter within the sole discretion of the bank, 
except as indicated below; all appealable matters can be received in 
either location. However, in cases where the District Administrator or 
Deputy Comptroller directly or indirectly participated in making the 
decision under review or directly or indirectly reports to the agency 
official who made the decision under review, the District Administrator 
or Deputy Comptroller must transfer the appeal to the Ombudsman. In 
addition, in cases where the Ombudsman should be recused from reviewing 
the decision under appeal, the Ombudsman shall transfer the appeal to 
the Senior Deputy Comptroller for Bank Supervision Policy in the OCC's 
Washington DC Office. The procedures for filing an appeal under the two 
options are outlined below.
    1. Supervisory Office Appeals. If a disagreement concerning an OCC 
supervisory decision or action cannot be resolved informally, a 
national bank may file an appeal with its immediate supervisory office. 
Community banks and regional banks seeking appeal under this option 
should file such appeals with the District Administrator or Deputy 
Comptroller of the OCC District in which the bank is headquartered. 
Banks in the Multinational Banking or Special Supervision programs 
using this option should file appeals with the Deputy Comptroller for 
the program in the Washington Office. In cases where the District 
Administrator or Deputy Comptroller directly or indirectly participated 
in making the decision under review or directly or indirectly reports 
to the agency official who made the decision under review, the District 
Administrator or Deputy Comptroller must transfer the appeal to the 
Ombudsman after advising the appellant.
    An appellant national banks must submit information in writing 
fully describing the matter in dispute and setting forth its basis for 
requesting an appeal. Upon receipt of an appeal, the appropriate 
District Administrator or Deputy Comptroller, or a designee who has not 
directly or indirectly participated in making the decision in dispute 
nor is directly or indirectly responsible to the agency official who 
made the decision under review, will contact the OCC employee(s) 
involved in the matter under appeal. The OCC employee(s) shall submit 
written or oral information concerning the basis of the appeal. If 
requested by a senior official of the national bank filing the appeal, 
the appropriate District Administrator or Deputy Comptroller shall 
arrange a meeting or a telephone call to more fully discuss the appeal 
and related issues.
    In the absence of any extenuating circumstances, the appropriate 
District Administrator or Deputy Comptroller shall issue a written 
response within 45 calendar days of the filing of the appeal. 
Immediately after the response is issued, the District Administrator or 
Deputy Comptroller shall forward to the Ombudsman copies of all 
relevant materials considered in the preparation of the response, 
including all written submissions by the bank.
    If the national bank disagrees with the response from the District 
Administrator or Deputy Comptroller, a senior official of the bank may 
further appeal the matter to the Ombudsman. The bank must file written 
notice of this second-tier appeal within 15 calendar days of receiving 
the response from the appropriate District Administrator or Deputy 
Comptroller.
    After receipt of a second-tier appeal, the Ombudsman shall review 
all materials considered by the appropriate District Administrator or 
Deputy Comptroller in the preparation of the initial response. The 
Ombudsman shall contact the national bank to ensure that the OCC is in 
possession of all relevant materials. If requested by either OCC 
management involved in the dispute or a senior official of the national 
bank filing the appeal, the Ombudsman shall arrange a meeting or a 
telephone call to more fully discuss the appeal and related issues. In 
the absence of any extenuating circumstances, the Ombudsman shall issue 
a written response to the second-tier appeal within 30 calendar days of 
the filing of that appeal.
    2. Appeals to the Ombudsman When disagreements concerning OCC 
supervisory decisions and actions cannot be resolved informally and a 
national bank chooses not to file an appeal with its immediate 
supervisory office, a national bank may file an appeal directly with 
the Ombudsman. In cases where the Ombudsman should be recused from 
reviewing the decision under appeal, the Ombudsman shall transfer the 
appeal to the Senior Deputy Comptroller for Bank Supervision Policy in 
the OCC's Washington DC office. In such cases, the procedures outlined 
below will apply.
    National banks filing appeals with the Ombudsman must submit 
information in writing fully describing the matter in dispute. After 
receipt of an appeal, the Ombudsman shall contact the OCC management 
official involved in the dispute. That management official shall submit 
written materials and relevant OCC documents pertaining to the bases of 
the appeal within 10 calendar days of the notice from the Ombudsman. 
The Ombudsman shall contact the national bank to ensure that the OCC is 
in possession of all relevant materials. If requested by either OCC 
management involved in the dispute or a senior official of the national 
bank filing the appeal, the Ombudsman shall arrange a meeting or a 
telephone call to more fully discuss the appeal and related issues. In 
the absence of any extenuating circumstances, the Ombudsman shall issue 
a written response to the appeal within 45 calendar days of the filing 
of the appeal by a national bank.
B. Follow-up by Ombudsman
    After the Ombudsman receives a decision on an appeal, the Ombudsman 
shall contact every appellant bank to inquire whether the bank believes 
OCC examiners have taken actions against the bank in retaliation for 
its appeal. The Ombudsman shall make these contacts (1) six months 
after the date the Ombudsman, Deputy Administrator or Deputy 
Comptroller issues a final written response to an appeal, and (2) six 
months after the date of completion of the first examination of the 
appellant bank following its appeal. A national bank may, of course, 
contact the Ombudsman at any time during or after the appeal if the 
bank reasonably believes that an OCC examiner is taking action against 
it in retaliation for its appeal. Upon identifying or learning of any 
possible retaliatory actions, the Ombudsman shall investigate the 
complaint; such investigations must be completed within 30 days. If the 
Ombudsman determines that retaliation has occurred, the Ombudsman shall 
forward the complaint to the District Administrator, Deputy 
Comptroller, or Inspector General for appropriate action.
C. Appealable Matters
    Except as otherwise provided, a national bank may seek a review of 
any agency decision or action, including a material supervisory 
determination. A material supervisory determination includes a 
determination relating to:
     Examination ratings;
     The adequacy of loan loss reserve provisions; and
     Loan classifications on loans that are significant to an 
institution.
    A national bank may not appeal:
     Appointments of receivers and conservators;
     Preliminary examination conclusions communicated to the 
national bank prior to the issuance of either a final Report of 
Examination or other written communication from the OCC; and
     Enforcement-related actions or decisions, including 
decisions to take prompt corrective action pursuant to section 38 of 
the Federal Deposit Insurance Act (12 U.S.C. Sec. 1831o).
    An enforcement-related action or decision commences, and therefore 
becomes unappealable, when the national bank receives notice from the 
OCC indicating its intention to pursue available remedies under 
applicable statutes or published enforcement-related policies of the 
OCC. Such policies include OCC's Policy for Corrective Action (PPM 
5310-3)(REV), Civil Money Penalty Policy (PPM 5000-7)(REV), and 
Securities Enforcement Policy (PPM 5310-5). These policies are 
available on request from the OCC's Communications Division, 250 E. 
Street, SW., Washington DC 20219-0001, 202-874-4700. For purposes of 
these guidelines only, remarks in a Report of Examination do not 
constitute notice of intent to pursue enforcement remedies.
    The appeals process established by these guidelines does not 
supersede any existing appeals procedures available under current law. 
Matters which are subject to an existing appeals process designed 
specifically for the issue in dispute, such as re-review of Shared 
National Credit findings (Banking Circular 189), and reconsideration of 
decisions on corporate applications (12 CFR 5.13(d)), are appealable to 
the Ombudsman when the agency decision is final under the specifically 
designed procedures.

III. Effect of Filing An Appeal

    As a general rule, the filing of an appeal with either the national 
bank's immediate supervisory office or with the Ombudsman serves to 
stay all agency decisions and actions until the appeal is resolved. In 
the appropriate circumstances, however, the Ombudsman may put the 
disputed agency decision or action into effect while the appeal is 
still pending.

    Dated: December 19, 1994.
Eugene A. Ludwig
Comptroller of the Currency.
[FR Doc. 94-31545 Filed 12-21-94; 8:45 am]
BILLING CODE 4810-33-P