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Federal Register / Vol. 86, No. 14 / Monday, January 25, 2021 / Notices supervisory determination that has been appealed will not advise the Office.
To provide further clarity, the Guidelines state that the Legal Division will provide counsel to the Office and generally advise on FDIC policies and rules. If an appeal seeks to change or modify FDIC policies or rules, or raises a policy matter of first impression, the Office will, with the Legal Divisions concurrence, refer the matter to the Chairpersons Office. In addition, the Legal Division will review decisions of the Office for consistency with applicable laws, regulations, and policies of the FDIC prior to their issuance. If the Legal Division determines that an Office decision is contrary to a law, regulation, or FDIC
policy, the Office will be required to revise the decision to conform with relevant laws, regulations, or policies.
The Legal Division will not exercise supervisory judgment or opine on the merits of an appeal.
Retaliation Concerns A trade association stated that the FDIC should take measures to ensure that reviewing officials are not retaliated against for their decisions. The FDIC has structured the Office to minimize the risk that a fear of retaliation could impact decisions by reviewing officials.
Reviewing officials will be hired for terms, and only former, rather than current, government officials will be eligible to serve as reviewing officials.
Additionally, all decisions related to which reviewing officials will serve on which panels will be decided by the Office, and not by any FDIC officials outside of the Office.
The FDIC also received comments reiterating that some IDIs may not appeal decisions due to a fear of retaliation from examiners. As noted in the proposal, FDIC policy currently prohibits any retaliation, abuse, or retribution by an agency examiner or any FDIC personnel against an institution, and the FDIC continues to explore options to reaffirm its commitment to and ensure compliance with this policy.

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Standard of Review Like the current standard of review, under the proposed Guidelines, the Division Director and the Office would review appeals for consistency with the policies, practices, and mission of the FDIC and the overall reasonableness of, and the support offered for, the positions advanced. Two trade associations encouraged the FDIC to adopt a de novo standard of review, and align the standard with the approach
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recently taken by the Federal Reserve Board FRB.
The FDIC agrees that a change in the standard of review for appeals to the Division Director would be appropriate.
The final Guidelines therefore provide that the Division Director will make his or her own supervisory determination, which is substantially similar to the standard adopted by the initial review panel under the FRBs approach.22
Under this standard, the Division Director would have discretion to consider examination workpapers and other materials developed by staff during an examination, but would make an independent supervisory determination, without deferring to the judgments of either party. The final guidelines do not, however, alter the standard of review when the appeal is reviewed by the Office. Consistent with the proposal, the Office would review appeals for consistency with the policies, practices, and mission of the FDIC and the overall reasonableness of, and the support offered for, the positions advanced.
Ex Parte Communications A law firm and two trade associations recommended that the FDIC prohibit ex parte communications between supervisory staff and the Office during an appeal, asserting that this is a due process and fairness concern. The FDIC
understands this concern and is addressing it in the final Guidelines by requiring that communications between the Office and either supervisory staff or the appealing institution, including materials submitted to the Office for review, are also shared with the other party to the appeal, subject to limitations on disclosure.
Review Panel Size The FDIC proposed that each appeal would be heard by a panel of three reviewing officials, and asked whether three reviewers per panel would be an appropriate number, or whether there were some situations where more or fewer panelists might be appropriate. A
number of commenters suggested panels comprised of five reviewing officials. In particular, a trade association asserted that this number is common across governmental bodies, affords increased diversity in perspectives and expertise, and decreases the likelihood of deference to the strong opinions of one panel member. Other commenters suggested expanding the size of panels to five members in order to accommodate the addition of staff with industry experience. Two commenters, 22 See
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including a trade association and a consultant, suggested expanding the size of review panels in case a review official becomes ill or must be recused.
A law firm suggested that relatively minor matters e.g., examination ratings, loan loss reserve provisions, loan classifications should be handled by a panel of three members, while more serious matters e.g., violations of law or regulation, applications, decisions to initiate informal enforcement actions, matters requiring Board attention should be handled by five-member panels.
The FDIC agrees that five-member panels could be beneficial in some situations. To provide the Office with flexibility, the final Guidelines provide that panels may be comprised of either three or five reviewing officials. When an appeal is submitted to the Office, a panel of either three or five reviewing officials will be assigned to consider the matter. The FDIC believes that initial experiences administering this new process may help to determine the most appropriate size for panels going forward.
Other Levels of Review The FDIC proposed that an IDI would be able to appeal the Division Directors decision to the Office, and that no appeal of the Offices decision would be permissible. The FDIC asked commenters whether the appellate process should have any additional levels of review before or after the Office.
Commenters generally stated that the process should not include an additional level of review before an appeal to the Office. In particular, a trade association asserted that the FDIC
should remove barriers for institutions wishing to appeal material supervisory determinations, including layers of review. However, a few commenters recommended an additional level of review following a decision by the Office. A law firm suggested allowing Office decisions to be appealed to the individuals that currently serve on the SARC, and a trade association suggested that either the Board or the institution could request reconsideration of Office decisions within 30 days of issuance. A
bank holding company also recommended that institutions have the option to bring matters to an administrative law judge as an alternative to review by the Office.
The final Guidelines do not include any additional levels of review. It is not clear that review by the individuals currently comprising the current SARC
would be beneficial because replacing the SARC with the Office was intended
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