[Federal Register Volume 69, Number 131 (Friday, July 9, 2004)]
[Notices]
[Pages 41479-41487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15635]


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FEDERAL DEPOSIT INSURANCE CORPORATION


Intra-Agency Appeal Process: Guidelines for Appeals of Material 
Supervisory Determinations and Guidelines for Appeals of Deposit 
Insurance Assessment Determinations

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Notice of guidelines.

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SUMMARY: On June 28, 2004, the Federal Deposit Insurance Corporation 
(``FDIC'') Board of Directors (``Board'') adopted revised Guidelines 
for Appeals of Material Supervisory Determinations (``guidelines''). 
The Guidelines for Appeals of Material Supervisory Determinations 
govern the Supervision Appeals Review Committee (``SARC'') process and 
supersede the FDIC's prior Guidelines for Appeals of Material 
Supervisory Determinations, which were adopted by the FDIC's Board of 
Directors on March 21, 1995. The guidelines reconstitute the SARC and 
modify the procedures for appeals to the SARC. On that same date, the 
Board also adopted Guidelines for Appeals of Deposit Insurance 
Assessment Determinations. The Guidelines for Appeals of Deposit 
Insurance Assessment Determinations govern the Assessment Appeals 
Committee (``AAC'') process. The guidelines reconstitute the AAC and 
set out procedures for appeals to the AAC. Both sets of guidelines are 
effective upon adoption.

DATES: The SARC Guidelines and the AAC Guidelines became effective on 
June 28, 2004.

FOR FURTHER INFORMATION CONCERNING THE SARC GUIDELINES CONTACT: Lisa K. 
Roy, Associate Director, Division of Supervision and Consumer 
Protection, (202) 898-3764; Christopher Bellotto, Counsel, Legal 
Division, (202) 898-3801, Federal Deposit Insurance Corporation, 550 
17th St., NW., Washington, DC 20429.

FOR FURTHER INFORMATION CONCERNING THE AAC GUIDELINES CONTACT: William 
V. Farrell, Chief, Assessment Management Section, Division of Finance, 
(202) 416-7156; Diane Ellis, Associate Director, Division of Insurance 
and Research, (202) 898-8978; Lisa K. Roy, Associate Director, Division 
of Supervision and Consumer Protection, (202) 898-3764; Christopher 
Bellotto, Counsel, (202) 898-3801, Legal Division, Federal Deposit 
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION:
    The revised Guidelines for Appeals of Material Supervisory 
Determinations

[[Page 41480]]

change the composition of the SARC, reducing it from five to three 
voting members, and incorporate changes to the procedures governing 
SARC appeals. Included are new rules under which the FDIC's Division of 
Supervision and Consumer Protection (``DSC'') issues written decisions 
if it denies requests for review of material supervisory 
determinations; if dissatisfied with the division's determination, 
institutions decide for themselves whether to appeal to the SARC; and 
SARC decisions will be published, with exempt material redacted. The 
types of determinations eligible for review by the SARC and the 
standards by which such appeals are decided remain unchanged.
    The Guidelines for Appeals of Deposit Insurance Assessment 
Determinations change the composition of the AAC, reducing it from 
seven to five voting members, and set forth procedures to be followed 
by insured depository institutions that choose to appeal adverse 
assessment determinations they have received from the appropriate FDIC 
division. As with the SARC, AAC decisions will be published, with 
exempt material redacted. The types of determinations eligible for 
review by the AAC and the standards by which such appeals are decided 
remain unchanged.
    On March 18, 2004, the FDIC published in the Federal Register, for 
a 30-day comment period, a notice of and request for comments the 
proposed revisions to the Guidelines for Appeals of Material 
Supervisory Determinations and the proposed Guidelines for Appeals of 
Deposit Insurance Assessment Determinations. (69 FR 12855). The comment 
period closed on April 19, 2004. The FDIC considered it desirable in 
this instance to garner comments regarding these guidelines, although 
notice and comment rulemaking was not required and need not be employed 
should the FDIC make future amendments.
    The FDIC received three comment letters, two from trade 
organizations (America's Community Bankers and the American Bankers 
Association) and one from a depository institution (The Bank of 
Easton). The comments generally supported the proposed guidelines, 
although a few objections were raised and several recommendations were 
made to somewhat revise specific parts of the proposal. The following 
is a discussion of the revised guidelines for the SARC and for the AAC 
and the comments received.

I. Guidelines for Appeals of Material Supervisory Determinations

Background

    Section 309(a) of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (Public Law 103-325, 108 Stat. 2160) (``Riegle 
Act'') required the FDIC (as well as the other Federal banking agencies 
and the National Credit Union Administration Board) to establish an 
independent intra-agency appellate process to review material 
supervisory determinations.
    The Riegle Act defines the term ``independent appellate process'' 
to mean 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 the appeals process, the 
FDIC is required to ensure that (1) an appeal of a material supervisory 
determination by an insured depository institution is heard and decided 
expeditiously; and (2) appropriate safeguards exist for protecting 
appellants from retaliation by agency examiners.
    On March 21, 1995, the FDIC's Board of Directors adopted the 
original Guidelines for Appeals of Material Supervisory Determinations, 
which established and set forth procedures governing the SARC, whose 
purpose was to consider and decide appeals of material supervisory 
determinations as required by the Riegle Act.
A. Membership
    As originally constituted, the SARC consisted of the FDIC Vice 
Chairperson (as chair of the SARC), the Director of the Division of 
Supervision (``DOS''), the Director of the Division of Compliance and 
Consumer Affairs (``DCA''), the Ombudsman, and the General Counsel (or 
their designees).
    The 1995 SARC guidelines were amended in 1999 to add the Director 
of the Division of Insurance (now the Director of the Division of 
Insurance and Research (``DIR'')) as a voting SARC member, to provide 
formally that the Directors of DOS and DCA (now the DSC Director) would 
not vote on cases brought before the SARC involving their respective 
(now consolidated) divisions, to provide that designees would be 
limited to the most senior members of a SARC member's staff, and to 
include Truth-in-Lending (Regulation Z) restitution. In addition, the 
SARC was expressly authorized to consider appeals of denied filings as 
set forth in 12 CFR 303.11(f) for which a Request for Reconsideration 
has been granted, other than denials of a change in bank control, 
change in senior executive officer or board of directors, or denial of 
an application pursuant to section 19 of the Federal Deposit Insurance 
Act (``FDI Act'') (which are contained in 12 CFR 308, subparts D, L, 
and M, respectively), if the filing was originally denied by the 
Director, Deputy Director or Associate Director of DSC.
    While the prior guidelines satisfied the Riegle Act's requirement 
to establish an independent appellate process for the review of 
material supervisory determinations, the revised guidelines will 
facilitate the disposition of SARC appeals and further underscore the 
perception of the SARC as a fair and independent high-level body for 
review of material supervisory determinations within the FDIC.
    In the Notice and Request for Comment published on March 18, 2004, 
the FDIC proposed to change the composition of the SARC so that the 
Director of DSC, the Director of DIR, and the Ombudsman would no longer 
serve on the SARC, and new SARC members would be drawn from the most 
senior levels of the Corporation.
    Under the revised guidelines, SARC membership would consist of 
three (3) voting members: (1) One of the inside FDIC Board members, 
either the Chairperson, the Vice Chairperson, or the Director 
(Appointive), as designated by the FDIC Chairperson (this person would 
serve as the Chairperson of the SARC); and (2) one deputy or special 
assistant to each inside FDIC Board member not designated as the SARC 
Chairperson.
    The General Counsel would be the fourth, and non-voting, member of 
the SARC. The FDIC Chairperson can designate alternate member(s) to the 
SARC if vacancies occur so long as the alternate member was not 
directly or indirectly involved in making or affirming the material 
supervisory determination under review. In addition, a member of the 
SARC can designate and authorize the most senior member of his or her 
staff--within the substantive area--to act on his or her behalf in SARC 
matters.
    One commenter noted that the designation ``inside directors'' would 
make the procedures more ``reader-friendly.'' The FDIC has two 
``outside directors''--the Director from the Office of the Comptroller 
of the Currency and the Director from the Office of Thrift Supervision. 
The FDIC has three ``inside directors''--the FDIC Chairperson, the FDIC 
Vice-Chairperson and the appointive FDIC Director. By using the 
designation suggested by the commenter, the procedures more clearly 
describe the membership of the SARC

[[Page 41481]]

and AAC. The FDIC has adopted this suggestion in the revised 
guidelines. In addition, the term ``special assistant'' has been added 
to clarify that directors may have both deputies and special assistants 
who may serve on the SARC (or AAC).
    The three commenters expressed concern over the removal of the 
FDIC's Ombudsman from the SARC. One commenter indicated a preference 
that the Ombudsman be the sole decision maker for appeals of material 
supervisory determinations, but, if not that, at least be retained as a 
voting member; one commenter acknowledged the potential for perceived 
conflicts that arise because the Ombudsman serves a dual role as SARC 
member as well as liaison to insured institutions; the third commenter 
saw the Ombudsman as playing a valuable role in facilitating 
discussions between institutions and examiners. The latter two 
commenters suggested that the Ombudsman be retained as a non-voting 
SARC member. The former commenter also objected to the FDIC's proposal 
on the grounds that it did not conform with the statutory requirement 
for the Ombudsman. No commenter opposed the elimination of division 
directors and one expressly supported that change.
    After considering the comments on the composition of the SARC, the 
FDIC continues to believe that the revised composition and structure of 
the SARC satisfies the requirements of the Riegle Act to establish an 
independent intra-agency appellate process and represents an 
improvement on SARC membership. A tension and a potential for conflict 
exist between the Ombudsman's statutory role and its role as a member 
of the SARC. The statute provides that the Ombudsman is a liaison 
between the agency and any affected person with respect to any problem 
resulting from the agency's regulatory activities. On the SARC, the 
Ombudsman is an agency deciding official. These two roles are 
fundamentally different and to a degree inconsistent. As liaison, the 
Ombudsman is required to be neutral, independent, and confidential. In 
fulfilling its statutory role, the Ombudsman collects information from 
the institution and the FDIC and attempts to promote communication 
between the institution and the FDIC. As a member of the SARC, the 
Ombudsman loses its liaison role and may be presented with actual, 
potential or perceived conflicts to its neutrality, independence and 
confidentiality. For example, the Ombudsman may receive confidential 
information from an institution before the matter is appealed to the 
SARC. If the Ombudsman is also a SARC member, he or she is placed in 
the difficult position of either (1) using that confidential 
information in the FDIC's decision-making process, even though the 
information was obtained under a promise of confidentiality, or (2) 
attempting to ignore information acquired in his or her Ombudsman role 
no matter how important he or she may think the information is.
    Making the Ombudsman a non-voting SARC member, as two commenters 
suggested, does not solve this dilemma. The FDIC believes that 
underlying tension between the two roles of the Ombudsman--as SARC 
member and as liaison between the agency and any affected person--
places the Ombudsman in a potentially conflicted position best resolved 
if the Ombudsman does not serve as a SARC member.\1\
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    \1\ An express basis for one of the comments favoring keeping 
the Ombudsman on the SARC is an expectation that the sort of 
conflict discussed above will occur, i.e., the commenter stated that 
the Ombudsman should remain on the SARC because the Ombudsman 
facilitated discussions between the institution and examiners. Such 
communications, however, were impermissible under the prior SARC 
guidelines if they addressed the merits of an appeal; ``The merits 
of any material supervisory determination for which an appeal has 
been initiated or a final decision made will not be eligible for 
consideration by the Ombudsman (except in his or her capacity as a 
member of the Supervision Appeals Review Committee).'' The substance 
of that limitation on the Ombudsman's role, once the matter has been 
appealed to the SARC, is retained in the revised guidelines.
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    The commenter's objection that the FDIC's proposal ``does not 
conform with the statutory requirement'' for the Ombudsman is not 
supported by the Riegle Act. The statute sets forth two duties for the 
Ombudsman: To act as liaison between the agency and any affected person 
and to assure that safeguards exist to encourage complainants to come 
forward and preserve confidentiality. 12 U.S.C. 4806(d). ``Independent 
appellate process'' is defined as review by an agency official who does 
not report to the official who made the determination under review. 12 
U.S.C. 4806(f)(2). No role for the Ombudsman as agency decision maker 
regarding material supervisory determinations is articulated. The FDIC 
believes that the proposed structure of the SARC fully complies with 
the Riegle Act. Consistent with this view, neither the Federal Reserve 
Board Ombudsman nor the Office of Thrift Supervision Ombudsman 
participates in deciding material supervisory determinations within 
those agencies.\2\ Under the prior guidelines, the Ombudsman could 
consider the merits of matters under review by the DSC Director or on 
appeal to the SARC only in its role as a SARC member. Under the revised 
guidelines the subject matter of a material supervisory determination 
that has been appealed to the SARC or that has been resolved in a final 
SARC decision is ineligible for consideration by the Ombudsman. Thus, 
unlike the prior guidelines, under the revised guidelines the Ombudsman 
may consider the merits of a material supervisory determination for 
which review has been requested from the DSC Director before the 
institution has made an appeal to the SARC. In addition, the Ombudsman 
may consider any other problem that an institution may have in dealing 
with the FDIC.
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    \2\ The Office of the Comptroller of the Currency's (OCC) 
Ombudsman, in contrast, acts as both fact gatherer and sole deciding 
official in material supervisory appeals, and did so prior to 
passage of the Riegle Act. The Act's legislative history indicates 
that pre-existing programs could continue: ``Some of the Federal 
banking agencies have in place procedures to settle disputes between 
the agency and a financial institution that may satisfy the 
requirements of this [regulatory appeals process] provision. In 
addition, some agencies, for example, the Comptroller of the 
Currency, may already have appointed an Ombudsman to hear appeals. 
Nothing in this section is intended to interfere with such existing 
programs.'' H.R. Conf. Rep. No. 103-652 (Aug. 2, 1994), 1994 
U.S.C.C.A.N. 1977, 2001, 1994 WL 405912.
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B. Procedures
    Institutions that wish to obtain SARC review of material 
supervisory determinations must file an appeal to the SARC within 30 
calendar days from the date of the division director's written 
determination. Unlike the prior process, institutions receive a written 
determination issued by DSC within 30 days, setting forth the reasons 
for the division's denial. Based on DSC's determination, institutions 
decide for themselves whether to appeal to the SARC. If the issue 
presented is not one that merits expending the time or effort of 
seeking a SARC determination, the institution may decide not to appeal. 
Under the new guidelines, that decision rests with the institution.
    The depository institution, which had recently completed a SARC 
appeal, complained that it was never informed of DSC's denial of its 
request for review or that the request had been passed to the SARC. The 
revised guidelines remedy this anomaly by providing that institutions 
receive a DSC determination and then have the opportunity to decide for 
themselves whether to file a SARC appeal. Another commenter expressly 
supported this provision, saying that a written decision from the DSC 
Director would ``add certainty'' to the status of a request.

[[Page 41482]]

    An appeal to the SARC is considered filed if received by the FDIC 
within 30 calendar days from the date of the determination being 
appealed or if placed in the United States mail within 30 calendar days 
from the date of that determination. Institutions must include their 
name and address, the name and address of any representative, a copy of 
the determination being appealed, and all of the reasons, factual or 
legal, why the institution disagrees with the DSC Director's 
determination. FDIC staff analyzes the filing for the SARC, but that 
analysis is part of the intra-agency deliberative process and is not 
disclosable to insured institutions. The SARC's written decision, 
setting forth the SARC's rationale, is provided to the institution 
within 60 days from the date the appeal is filed.
    One commenter suggested that the SARC, in its written decision, and 
the DSC Director, in its written determination of a request for review, 
be required to respond separately to each argument advanced by an 
institution in support of its request or appeal. A letter ``generally 
denying'' a request, the commenter stated, does not demonstrate an open 
commitment to communication, does not help an institution to understand 
the basis for a denial, does not help an institution determine whether 
to file an appeal with the SARC, leaves the impression that the request 
was not given sufficient consideration, and is not useful as precedent. 
While the FDIC understands these concerns in the comment and will work 
to see that decisions issued in the SARC and AAC processes inform 
institutions of the reasons(s) for the decision rendered, the 
requirement that every issue raised be separately addressed in every 
case would impose burdens that do not benefit the industry or the FDIC. 
For example, in some cases issues may be raised that are insubstantial 
or frivolous or that miss the point of the matter. In addition, issues 
may be raised that have been presented and addressed in SARC or AAC 
precedent that may be cited without reiteration. Accordingly, while the 
FDIC will consider every issue raised in every case, every issue raised 
need not be specifically addressed in a written opinion. See United 
States v. Garza, 165 F.3d 312, 314 (5th Cir. 1999) (litigant's right to 
have all issues fully considered and ruled on by the appellate court 
does not equate to a right to a full written opinion on every issue 
raised). For these reasons, the FDIC has decided not to adopt the 
commenter's suggestion.
    The SARC has the discretion, whether or not a request is made, to 
determine to allow an oral presentation. If an institution wishes to 
make an oral presentation, it should include in its appeal a statement 
to that effect. Oral presentations, however, are granted only if the 
SARC determines in its discretion that the oral presentation is likely 
to prove helpful or is otherwise in the public interest. At the oral 
presentation, the institution will present its position and respond to 
any questions the SARC might have. The SARC, in its discretion, may 
also require that FDIC staff participate in the oral presentation to 
the extent the SARC deems appropriate.
    One commenter proposed that the section governing ``Contents of 
Appeal'' be amended to advise institutions to include a request for 
oral presentation, if they so desire. The FDIC agrees with this 
suggestion and the guidelines for both the SARC and the AAC have been 
amended accordingly. The depository institution commented that denial 
of oral presentation, where requested, should be separately noticed. 
This comment too has been adopted and a provision has been added 
mandating separate notice to the requesting institution of the SARC (or 
AAC) determination regarding any request for oral presentation. 
Separate notice will also be provided if a case is transferred by a 
division director directly to the SARC (or AAC).
    Only matters previously reviewed at the division level, resulting 
either in a written determination or direct referral to the SARC, are 
appealable to the SARC. Evidence not presented for review to the DSC 
Director may be submitted to the SARC only if authorized by the SARC 
Chairperson. No discovery or other such rights are created in the SARC 
process.
    The types of determinations eligible for review by the SARC and the 
standards by which SARC appeals are decided remain unchanged from the 
previous guidelines.
    The provision for publication of SARC and AAC decisions, with 
appropriate redactions to protect confidential information, was 
expressly endorsed by one commenter.
    The FDIC proposed to eliminate the provision in the original 
guidelines that allowed for reconsideration of SARC decisions if new 
information were submitted and good cause shown why that information 
was material to the dispute. No institution ever invoked this 
provision, and, in any event, the discretion to revise decisions is 
implicit. One commenter, however, felt that retaining a reconsideration 
provision would be helpful to institutions that may not understand that 
such an avenue is available. The FDIC agrees with the commenter and the 
revised SARC and AAC procedures provide for reconsideration of SARC and 
AAC decisions if the institution can show an intervening change in the 
controlling law or the availability of material evidence that was not 
reasonably available when the decision was issued.

II. Guidelines for Appeals of Deposit Insurance Assessment 
Determinations

    The FDIC Board of Directors created the AAC in 1999 to provide a 
high-level process for considering all deposit insurance assessment 
appeals brought from determinations made by the appropriate FDIC 
Divisions. Responsibility for deposit insurance assessments is shared 
by the Division of Finance (``DOF''), DIR and, in some respects, DSC. 
DOF is responsible for calculating the assessments owed by individual 
insured institutions based on assessment risk classifications assigned 
by DIR, which in turn uses supervisory information provided by DSC. To 
calculate an institution's assessment, DOF applies the assessment rate 
that corresponds to the institution's assessment risk classification to 
that institution's assessment base. DOF determines the assessment base 
from deposit and other data submitted in the institution's Report of 
Condition or Thrift Financial Report. An insured institution may 
request revision of its quarterly assessment payment by following the 
procedures set forth at 12 CFR 327.3(h); similarly, an insured 
institution may request review of its assessment risk classification by 
following the procedures set forth at 12 CFR 327.4(d). Having complied 
with those procedures and received a determination from the appropriate 
division, an institution dissatisfied with that division's 
determination may file an appeal with the AAC. After reviewing the 
determination made at the division level, the AAC will issue a final 
decision.

A. Membership

    Since its creation in 1999, the AAC membership has included 
individuals who are knowledgeable and experienced in matters related to 
the FDIC's assessment activities, bringing to the AAC the necessary 
experience and judgment to make well-informed decisions concerning 
determinations on appeal. As originally constituted, the AAC membership 
consisted of the Vice Chairperson of the Board (as Chairperson of the 
AAC), the Deputy to the Office of the Comptroller of the Currency's 
(``OCC'') member of the FDIC's Board of Directors, the Deputy to the 
Office of Thrift Supervision's

[[Page 41483]]

(``OTS'') member on the FDIC's Board of Directors; the General Counsel, 
the Director of the Division of Supervision and Consumer Protection; 
the Deputy to the Chairperson and Chief Financial Officer or the DOF 
Director; and the DIR Director.
    Under the guidelines, AAC membership now consists of five (5) 
voting members: (1) One inside FDIC Board member, either the Vice 
Chairperson or the Director (Appointive), as designated by the FDIC 
Chairperson (this person would serve as Chairperson of the AAC); (2) a 
deputy or special assistant to the FDIC Chairperson, to be designated 
by the FDIC Chairperson; (3) a deputy or special assistant to the OCC 
member on the FDIC's Board of Directors; (4) a deputy or special 
assistant to the OTS member on the FDIC's Board of Directors; and (5) a 
deputy or special assistant to either the Vice Chairperson or the 
inside FDIC Director (Appointive), whoever is not the AAC Chairperson. 
The General Counsel is the sixth, and non-voting, member of the AAC. 
The FDIC Chairperson may designate alternate member(s) to the AAC if 
vacancies occur so long as the alternate member is not directly or 
indirectly involved in making or affirming the determination under 
review. A member of the AAC may designate and authorize the most senior 
member of his or her staff within the substantive area to act on his or 
her behalf in AAC matters.
    Like the SARC guidelines, the AAC guidelines use the designation 
``inside'' FDIC directors to distinguish them from the OTS and OCC 
Directors, as suggested by a commenter. In addition, the term ``special 
assistant'' has been added to clarify that directors may have both 
deputies and special assistants who may serve on the AAC.

B. Procedures

    Under the FDIC's assessment regulations, institutions that dispute 
the computation of their quarterly assessment payments must comply with 
the filing requirements set forth at 12 CFR 327.3(h) and institutions 
that dispute their risk classification must comply with the filing 
requirements set forth at 12 CFR 327.4(d).
    Section 327.3(h) provides that an institution may request revision 
of the computation of its quarterly assessment payment and sets out the 
procedures for doing so. Any such request must be made within 60 days 
of the quarterly assessment invoice for which a revision is requested, 
or within 60 days of detection of an error in the institution's 
quarterly Call Report and must include any supporting documentation. 
Assessment audit and assessment refund determinations are also subject 
to review under section 327.3(h), although not expressly mentioned in 
the rule. Additional information requested by the FDIC must be provided 
within 21 days. Section 327.3(h) mandates that the FDIC respond within 
60 days and provides that the response should include the FDIC's 
determination wherever feasible; otherwise, the FDIC's determination--
rendered by the Chief Financial Officer or designee (usually DOF)--is 
to be made as promptly as possible.
    Under section 327.4(d), an institution may request review of its 
assessment risk classification within 90 days from the date it receives 
notice of that classification by the FDIC. Supporting documentation 
must be included with the request. Any additional information requested 
by the FDIC must be provided within 21 days. The FDIC--through the 
appropriate division--either DIR or DSC--must promptly notify the 
institution of its determination.
    An insured depository institution dissatisfied with the 
determination made by the appropriate division pursuant to 12 CFR 
327.3(h) or 327.4(d) may appeal that determination to the AAC. The AAC 
reviews the determination being appealed and, unless the AAC determines 
to refer the matter to the FDIC Board of Directors for consideration, 
renders a final determination which constitutes final agency action. 
FDIC staff analyzes the filing for the AAC, but that analysis is part 
of the intra-agency deliberative process and is not disclosable to 
insured institutions. The AAC's written decision, setting forth its 
rationale, is provided to the institution.
    As with the SARC, the AAC has the discretion, whether or not a 
request is made, to allow an oral presentation. The institution's 
appeal may contain a statement regarding whether it wishes to make an 
oral presentation. Oral presentations are granted only if the AAC 
determines in its discretion that oral presentation would be helpful or 
would otherwise be in the public interest. At the oral presentation, 
the institution presents its position and responds to any questions the 
AAC might have. The AAC, in its discretion, may also require that FDIC 
staff participate in the oral presentation to the extent the AAC deems 
appropriate.
    As stated in the SARC discussion, the suggestion of one commenter 
that the section governing ``Contents of Appeal'' be amended to advise 
institutions to include a request for oral presentation, if they so 
desire, has been adopted. In addition, a provision mandating separate 
notice to the requesting institution of the AAC's determination 
regarding any request for oral presentation has been added as well. 
Separate notice will also be provided if a case is transferred by a 
division director directly to the AAC.
    Only matters previously reviewed at the division level are subject 
to AAC review. Evidence not presented for review to at the division 
level may be submitted to the AAC only if authorized by the AAC 
Chairperson. No discovery or other such rights are created in the AAC 
process.
    A reconsideration provision has been added to the AAC guidelines as 
suggested by a commenter. Reconsideration of AAC decisions may be 
granted if the institution can show an intervening change in the 
controlling law or the availability of material evidence that was not 
reasonably available when the decision was issued.
    For the reasons stated in the SARC discussion, the FDIC has decided 
not to add a provision requiring that AAC decisions address every issue 
raised.
    The Guidelines for Appeals of Material Supervisory Determinations 
are set forth below. The Guidelines for Appeals of Deposit Insurance 
Assessment Determinations immediately follow.
* * * * *
    For the reasons stated in the Preamble, the Board has adopted the 
Guidelines for Appeals of Material Supervisory Determinations as set 
forth below.

Guidelines for Appeals of Material Supervisory Determinations

A. Introduction

    Section 309(a) of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (Public Law 103-325, 108 Stat. 2160) (``Riegle 
Act'') required the Federal Deposit Insurance Corporation (``FDIC'') to 
establish an independent intra-agency appellate process to review 
material supervisory determinations made at insured depository 
institutions that it supervises. The Guidelines for Appeals of Material 
Supervisory Determinations (``guidelines'') describe the types of 
determinations that are eligible for review and the process by which 
appeals will be considered and decided. The procedures set forth in 
these guidelines establish an appeals process for the review of 
material supervisory determinations by the Supervision Appeals Review 
Committee (``SARC'').

[[Page 41484]]

B. SARC Membership

    The following individuals comprise the three (3) voting members of 
the SARC: (1) One inside FDIC Board member, either the Chairperson, the 
Vice Chairperson, or the FDIC Director (Appointive), as designated by 
the FDIC Chairperson (this person would serve as the Chairperson of the 
SARC); and (2) one deputy or special assistant to each of the inside 
FDIC Board members who are not designated as the SARC Chairperson. The 
General Counsel is a non-voting member of the SARC. The FDIC 
Chairperson may designate alternate member(s) to the SARC if there are 
vacancies so long as the alternate member was not involved in making or 
affirming the material supervisory determination under review. A member 
of the SARC may designate and authorize the most senior member of his 
or her staff within the substantive area of responsibility related to 
cases before the SARC to act on his or her behalf.

C. Institutions Eligible To Appeal

    The guidelines apply to the insured depository institutions that 
the FDIC supervises (i.e., insured State nonmember banks (except 
District banks) and insured branches of foreign banks) and also to 
other insured depository institutions with respect to which the FDIC 
makes material supervisory determinations.

D. Determinations Subject To Appeal

    An institution may appeal any material supervisory determination 
pursuant to the procedures set forth in these guidelines. Material 
supervisory determinations include:
    (a) CAMELS ratings under the Uniform Financial Institutions Rating 
System;
    (b) EDP ratings under the Uniform Interagency Rating System for 
Data Processing Operations;
    (c) Trust ratings under the Uniform Interagency Trust Rating 
System;
    (d) CRA ratings under the Revised Uniform Interagency Community 
Reinvestment Act Assessment Rating System;
    (e) Consumer compliance ratings under the Uniform Interagency 
Consumer Compliance Rating System;
    (f) Registered transfer agent examination ratings;
    (g) Government securities dealer examination ratings;
    (h) Municipal securities dealer examination ratings;
    (i) Determinations relating to the adequacy of loan loss reserve 
provisions;
    (j) Classifications of loans and other assets in dispute the amount 
of which, individually or in the aggregate, exceed 10 percent of an 
institution's total capital;
    (k) Determinations relating to violations of a statute or 
regulation that may impact the capital, earnings, or operating 
flexibility of an institution, or otherwise affect the nature and level 
of supervisory oversight accorded an institution;
    (l) Truth in Lending (Regulation Z) restitution;
    (m) Filings made pursuant to 12 CFR 303.11(f), for which a Request 
for Reconsideration has been granted, other than denials of a change in 
bank control, change in senior executive officer or board of directors, 
or denial of an application pursuant to section 19 of the FDI Act 
(which are contained in 12 CFR 308, subparts D, L, and M, 
respectively), if the filing was originally denied by the DSC Director, 
Deputy Director or Associate Director; and
    (n) Any other supervisory determination (unless otherwise not 
eligible for appeal) that may impact the capital, earnings, operating 
flexibility, or capital category for prompt corrective action purposes 
of an institution, or otherwise affect the nature and level of 
supervisory oversight accorded an institution.
    Material supervisory determinations do not include:
    (a) Decisions to appoint a conservator or receiver for an insured 
depository institution;
    (b) Decisions to take prompt corrective action pursuant to section 
38 of the Federal Deposit Insurance Act, 12 U.S.C. 1831o;
    (c) Determinations for which other appeals procedures exist (such 
as determinations of deposit insurance assessment risk classifications 
and payment calculations);
    (d) Decisions to initiate formal enforcement actions under section 
8 of the Federal Deposit Insurance Act, 12 U.S.C. 1818 (including 
assessment of civil money penalties) or under any other provisions of 
law or regulation; and
    (e) Decisions to initiate informal enforcement actions (such as 
memoranda of understanding).
    The FDIC recognizes that, although determinations to take prompt 
corrective action or initiate formal or informal enforcement actions 
are not appealable, the determinations upon which such actions may be 
based (e.g., loan classifications) are appealable provided they 
otherwise qualify.

E. Good Faith Resolution

    An institution should make a good faith effort to resolve any 
dispute concerning a material supervisory determination with the on-
site examiner and/or the appropriate Regional Office. The on-site 
examiner and the Regional Office will promptly respond to any concerns 
raised by an institution regarding a material supervisory 
determination. Informal resolution of disputes with the on-site 
examiner and/or the appropriate Regional Office is encouraged, but 
seeking such a resolution is not a condition to filing a request for 
review with the Division of Supervision and Consumer Protection or an 
appeal to the SARC under these guidelines.

F. Filing a Request for Review With the FDIC Division of Supervision 
and Consumer Protection

    An institution may file a request for review of a material 
supervisory determination with the Director, Division of Supervision 
and Consumer Protection, 550 17th Street, NW., Room F-4076, Washington, 
DC 20429, within 60 calendar days following the institution's receipt 
of a report of examination containing a material supervisory 
determination or other written communication of a material supervisory 
determination. A request for review must be in writing and must 
include:
    (a) A detailed description of the issues in dispute, the 
surrounding circumstances, the institution's position regarding the 
dispute and any arguments to support that position (including citation 
of any relevant statute, regulation, policy statement or other 
authority), how resolution of the dispute would materially affect the 
institution, and whether a good faith effort was made to resolve the 
dispute with the on-site examiner and the Regional Office; and
    (b) A statement that the institution's board of directors has 
considered the merits of the request and authorized that it be filed.
    The Director, Division of Supervision and Consumer Protection, will 
issue a written determination of the request for review, setting forth 
the grounds for that determination, within 30 days of receipt of the 
request. No appeal to the SARC will be allowed unless an institution 
has first filed a timely request for review with the Division of 
Supervision and Consumer Protection.

G. Appeal to the SARC

    An institution that does not agree with the written determination 
rendered by the Director of the Division of Supervision and Consumer 
Protection must appeal that determination to the SARC within 30 
calendar days from the

[[Page 41485]]

date of that determination. The Director's determination will inform 
the institution of the 30-day time period for filing with the SARC and 
will provide the mailing address for any appeal the institution may 
wish to file. Failure to file within the 30-day time limit may result 
in denial of the appeal by the SARC. If the Director of the Division of 
Supervision and Consumer Protection determines that an institution is 
entitled to relief that the Director lacks delegated authority to 
grant, the Director may, with the approval of the Chairperson of the 
SARC, transfer the matter directly to the SARC without issuing a 
determination. Notice of such a transfer will be provided to the 
institution.

H. Filing With the SARC

    An appeal to the SARC will be considered filed if the written 
appeal is received by the FDIC within 30 calendar days from the date of 
the division director's written determination or if the written appeal 
is placed in the U.S. mail within that 30-day period. If the 30th day 
after the date of the division director's written determination is a 
Saturday, Sunday or Federal holiday, filing may be made on the next 
business day. The appeal should be sent to the address indicated on the 
determination being appealed.

I. Contents of Appeal

    The appeal should be labeled to indicate that it is an appeal to 
the SARC and should contain the name, address, and telephone number of 
the institution and any representative, as well as a copy of the 
determination being appealed. If oral presentation is sought, that 
request should be included in the appeal. Only matters previously 
reviewed at the division level, resulting in a written determination or 
direct referral to the SARC, may be appealed to the SARC. Evidence not 
presented for review to the DSC Director may be submitted to the SARC 
only if authorized by the SARC Chairperson. The institution should set 
forth all of the reasons, legal and factual, why it disagrees with the 
determination. Nothing in the SARC administrative process shall create 
any discovery or other such rights.

J. Burden of Proof

    The burden of proof as to all matters at issue in the appeal, 
including timeliness of the appeal if timeliness is at issue, rests 
with the institution.

K. Oral Presentation

    The SARC may, in its discretion, whether or not a request is made, 
determine to allow an oral presentation. The SARC generally grants a 
request for oral presentation only if it determines that oral 
presentation is likely to be helpful or would otherwise be in the 
public interest. Notice of the SARC's determination to grant or deny a 
request for oral presentation will be provided to the institution. If 
oral presentation is held, the institution will be allowed to present 
its positions on the issues raised in the appeal and to respond to any 
questions from the SARC. The SARC may also require that FDIC staff 
participate as the SARC deems appropriate.

L. Dismissal and Withdrawal

    An appeal may be dismissed by the SARC if it is not timely filed, 
if the basis for the appeal is not discernable from the appeal, or if 
the institution moves to withdraw the appeal.

M. Scope of Review and Decision

    The SARC will review the appeal for consistency with the policies, 
practices and mission of the FDIC and the overall reasonableness of and 
the support offered for the positions advanced, and notify the 
institution, in writing, of its decision concerning the disputed 
material supervisory determination(s) within 60 days from the date the 
appeal is filed, or within 60 days from oral presentation, if held. 
SARC review will be limited to the facts and circumstances as they 
existed prior to or at the time the material supervisory determination 
was made, even if later discovered, and no consideration will be given 
to any facts or circumstances that occur or corrective action taken 
after the determination was made. The SARC may reconsider its decision 
only on a showing of an intervening change in the controlling law or 
the availability of material evidence not reasonably available when the 
decision was issued.

N. Publication of Decisions

    SARC decisions will be published. Published SARC decisions will be 
redacted to avoid disclosure of exempt information. Published SARC 
decisions may be cited as precedent in appeals to the SARC.

O. SARC Guidelines Generally

    Appeals to the SARC will be governed by these guidelines. The SARC 
will retain the discretion to waive any provision of the guidelines for 
good cause; the SARC may adopt supplemental rules governing SARC 
operations; the SARC may order that material be kept confidential; and 
the SARC may consolidate similar appeals.

P. Limitation on Agency Ombudsman

    The subject matter of a material supervisory determination for 
which either an appeal to the SARC has been filed or a final SARC 
decision issued is not eligible for consideration by the Ombudsman.

Q. Coordination With State Regulatory Authorities

    In the event that a material supervisory determination subject to a 
request for review is the joint product of the FDIC and a State 
regulatory authority, the Director, Division of Supervision and 
Consumer Protection, will promptly notify the appropriate State 
regulatory authority of the request, provide the regulatory authority 
with a copy of the institution's request for review and any other 
related materials, and solicit the regulatory authority's views 
regarding the merits of the request before making a determination. In 
the event that an appeal is subsequently filed with the SARC, the SARC 
will notify the institution and the State regulatory authority of its 
decision. Once the SARC has issued its determination, any other issues 
that may remain between the institution and the State authority will be 
left to those parties to resolve.

R. Effect on Supervisory or Enforcement Actions

    The use of the procedures set forth in these guidelines by any 
institution will not affect, delay, or impede any formal or informal 
supervisory or enforcement action in progress or affect the FDIC's 
authority to take any supervisory or enforcement action against that 
institution.

S. Effect on Applications or Requests for Approval

    Any application or request for approval made to the FDIC by an 
institution that has appealed a material supervisory determination 
which relates to or could affect the approval of the application or 
request will not be considered until a final decision concerning the 
appeal is made unless otherwise requested by the institution.

T. Prohibition on Examiner Retaliation

    The FDIC has an experienced examination workforce and is proud of 
its professionalism and dedication. FDIC policy prohibits any 
retaliation, abuse, or retribution by an agency examiner or any FDIC 
personnel against an institution. Such behavior against an institution 
that appeals a material supervisory determination constitutes 
unprofessional conduct and will subject the examiner or other personnel 
to

[[Page 41486]]

appropriate disciplinary or remedial action. Institutions that believe 
they have been retaliated against are encouraged to contact the 
Regional Director for the appropriate FDIC region. Any institution that 
believes or has any evidence that it has been subject to retaliation 
may file a complaint with the Director, Office of the Ombudsman, 
Federal Deposit Insurance Corporation, 550 17th Street, Washington, DC 
20429, explaining the circumstances and the basis for such belief or 
evidence and requesting that the complaint be investigated and 
appropriate disciplinary or remedial action taken. The Office of the 
Ombudsman will work with the Division of Supervision and Consumer 
Protection to resolve the allegation of retaliation. For the reasons 
stated in the Preamble, the Board has adopted the Guidelines for 
Appeals of Deposit Insurance Assessment Determinations as set forth 
below.

Guidelines for Appeals of Deposit Insurance Assessment Determinations

A. Introduction

    The Assessment Appeals Committee (``AAC'') was formed in 1999 and, 
pursuant to the direction of the FDIC Board of Directors, has been 
functioning as the appellate entity responsible for making final 
determinations pursuant to Part 327 of the FDIC's regulations regarding 
the assessment risk classification and the assessment payment 
calculation of insured depository institutions. Institutions that 
dispute the computation of their quarterly assessment payments must 
comply with the time limits and other filing requirements set forth at 
12 CFR 327.3(h). Generally, any such request may be made within 60 days 
of the quarterly assessment invoice for which a revision is requested, 
or within 60 days of the filing of an amendment to the institution's 
quarterly report of condition. Institutions that dispute their risk 
classification must comply with the time limits and other filing 
requirements set forth at 12 CFR 327.4(d). Generally, an institution 
may request review of its assessment risk classification within 90 days 
from the date it receives notice of that classification by the FDIC. 
The AAC provides a process for considering all deposit insurance 
assessment appeals brought from determinations made by the appropriate 
FDIC divisions pursuant to those regulations. The procedures set forth 
in these guidelines apply to all appeals to the AAC.

B. AAC Membership

    The following individuals comprise the five (5) voting members of 
the AAC, representing each member of the FDIC Board of Directors: (1) 
One inside FDIC Board member, either the Vice Chairperson or the 
Director (Appointive), as designated by the FDIC Chairperson (this 
person would serve as Chairperson of the AAC); (2) one of the deputies 
or special assistants to the FDIC Chairperson, to be designated by the 
FDIC Chairperson; (3) a deputy or special assistant to the Office of 
the Comptroller of the Currency's member on the FDIC's Board of 
Directors; (4) a deputy or special assistant to the Office of Thrift 
Supervision's member on the FDIC's Board of Directors; and (5) a deputy 
or special assistant to either the Vice Chairperson or the inside 
Director (Appointive), whoever is not the AAC Chairperson. The General 
Counsel is a non-voting member of the AAC. The FDIC Chairperson may 
designate alternative member(s) for the AAC if vacancies occur. A 
member of the AAC may designate and authorize the most senior member of 
his or her staff within the substantive area of responsibility related 
to cases before the AAC to act on his or her behalf.

C. Institutions Eligible to Appeal

    These guidelines apply to all depository institutions insured by 
the FDIC.

D. Determinations Subject to Appeal

    The AAC, upon appeal by an insured depository institution, reviews 
determinations of the Director of the Division of Insurance and 
Research or the Director of the Division of Supervision and Consumer 
Protection made pursuant to the procedures set forth at 12 CFR 327.4(d) 
regarding the assessment risk classification assigned by the FDIC to 
the institution and renders a final determination. The AAC also, upon 
appeal by an insured depository institution, reviews determinations 
made pursuant to 12 CFR 327.3(h) by the Chief Financial Officer (or the 
Director of the Division of Finance, as designee) regarding the 
computation of the institution's assessment payment and renders a final 
determination.

E. Appeal to the AAC

    An institution that does not agree with the written determination 
rendered by the appropriate division director pursuant to 12 CFR 
327.4(d) and 12 CFR 327.3(h) must appeal that determination to the AAC 
within 30 calendar days from the date of the determination. The 
division director's determination will inform the institution of the 
30-day time limit for filing with the AAC and will provide the mailing 
address for any appeal the institution may wish to file. Failure to 
file within the 30-day time period may result in denial of the appeal 
by the AAC.
    If a division director determines that an institution is entitled 
to relief that the director lacks delegated authority to grant, the 
director may, with the approval of the Chairperson of the AAC, transfer 
the matter directly to the AAC without issuing a determination. Notice 
of such a transfer will be provided to the institution.

F. Filing With the AAC

    An appeal to the AAC will be considered filed if the written appeal 
is received by the FDIC within 30 calendar days from the date of the 
division director's written determination or if the written appeal is 
placed in the U.S. mail within that 30-day period. If the 30th day 
after the date of the division director's written determination is a 
Saturday, Sunday or Federal holiday, filing may be made on the next 
business day. The appeal should be sent to the address indicated on the 
determination being appealed.

G. Contents of Appeal

    The appeal should be labeled to indicate that it is an appeal to 
the AAC and should contain the name, address, and telephone number of 
the institution and any representative, as well as a copy of the 
determination being appealed. If oral presentation is sought, that 
request should be included in the appeal. Only matters previously 
reviewed at the division level, resulting in either a written 
determination or a direct referral to the AAC, may be appealed to the 
AAC. Evidence not presented for review at the division level may be 
submitted to the AAC only if authorized by the AAC Chairperson. The 
institution should set forth all of the reasons, legal and factual, why 
it disagrees with the determination. Nothing in the AAC administrative 
process shall create any discovery or other such rights.

H. Burden of Proof

    The burden of proof as to all matters at issue in the appeal, 
including timeliness of the appeal if timeliness is at issue, rests 
with the institution.

I. Oral Presentation

    The AAC may, in its discretion, whether or not a request is made, 
determine to allow an oral presentation. The AAC generally grants a 
request for oral presentation only if it determines

[[Page 41487]]

that oral presentation is likely to be helpful or would otherwise be in 
the public interest. Notice of the AAC's determination to grant or deny 
a request for oral presentation will be provided to the institution. If 
oral presentation is held, the institution will be allowed to present 
its position on the issues raised in the appeal and to respond to any 
questions from the AAC. The AAC may also require that FDIC staff 
participate as the AAC deems appropriate.

J. Dismissal and Withdrawal

    An appeal may be dismissed by the AAC if it is not timely filed, if 
the legal or factual basis for the appeal is not discernable from the 
appeal, or if the institution moves to withdraw the appeal.

K. Scope of Review and Decision

    The AAC will review all submissions concerning an appeal, review 
the final determination being appealed, consider any other matters it 
deems in its discretion to be appropriate, and issue a written decision 
within 60 days from the date the appeal is filed, or within 60 days 
from oral presentation, if held. The AAC may reconsider its decision 
only on a showing of an intervening change in the controlling law or 
the availability of material evidence not reasonably available when the 
decision was issued.

L. Publication of Decisions

    AAC decisions will be published. Published AAC decisions will be 
redacted to avoid disclosure of exempt information. Published decisions 
of the AAC may be cited as precedent in appeals to the AAC.

M. AAC Guidelines Generally

    Appeals to the AAC will be governed by these guidelines. The AAC 
will retain the discretion to waive any provision of the guidelines for 
good cause; the AAC may adopt supplemental rules governing AAC 
operations; the AAC may order that material be kept confidential; and 
the AAC may consolidate similar appeals.

N. Effect on Deposit Insurance Assessment Payments

    The use of the procedures set forth in these guidelines by an 
insured institution will not affect, delay, or impede the obligation of 
that institution to make timely payment of any deposit insurance 
assessment.

    By order of the Board of Directors.

    Dated at Washington, DC this 28th day of June, 2004.

Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. 04-15635 Filed 7-8-04; 8:45 am]
BILLING CODE 6714-01-P