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Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations
Supervisory Guidance, issued by the NCUA, Federal Deposit Insurance Corporation FDIC, the Board of Governors of the Federal Reserve the Board, the Office of Comptroller of the Currency OCC, and the Consumer Financial Protection Bureau Bureau collectively, the agencies on September 11, 2018 2018 Statement.
By codifying the 2018 Statement, with amendments, the final rule confirms that the NCUA will continue to follow and respect the limits of administrative law in carrying out their supervisory responsibilities. The 2018 Statement reiterated well-established law by stating that, unlike a law or regulation, supervisory guidance does not have the force and effect of law. As such, supervisory guidance does not create binding legal obligations for the public.
Because it is incorporated into the final rule, the 2018 Statement, as amended, is binding on the NCUA. The final rule adopts the rule as proposed without change.
DATES: The provisions of this final rule are effective on March 5, 2021.
FOR FURTHER INFORMATION CONTACT:
Naghi Khaled, Policy Officer 703 664
3883 or Scott Neat, Associate Director, Office of Examinations and Insurance at 703 5186363; Ian Marenna, Associate General Counsel, or Marvin Shaw, Staff Attorney, Office of General Counsel, at the above address or telephone 703
5186540. National Credit Union Administration, 1775 Duke Street, Alexandria, VA 22314.
SUPPLEMENTARY INFORMATION:

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I. Background The NCUA recognizes the important distinction between issuances that serve to implement acts of Congress known as regulations or legislative rules and non-binding supervisory guidance documents.1 Regulations create binding legal obligations. Supervisory guidance is issued by an agency to advise the public prospectively of the manner in which the agency proposes to exercise a discretionary power and does not create binding legal obligations.2
In recognition of the important distinction between rules and guidance, on September 11, 2018, the NCUA along 1 Regulations are commonly referred to as legislative rules because regulations have the force and effect of law. Perez v. Mortgage Bankers Association, 575 U.S. 92, 96 2015 citations omitted.
2 See Chrysler v. Brown, 441 U.S. 281, 302 1979
quoting the Attorney Generals Manual on the Administrative Procedure Act at 30 n.3 1947
Attorney Generals Manual and discussing the distinctions between regulations and general statements of policy, of which supervisory guidance is one form.

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with the Federal Deposit Insurance Corporation FDIC, the Board of Governors of the Federal Reserve the Board, the Office of Comptroller of the Currency OCC, and the Consumer Financial Protection Bureau Bureau collectively, the agencies issued the Interagency Statement Clarifying the Role of Supervisory Guidance 2018
Statement to explain the role of supervisory guidance and describe the agencies approach to supervisory guidance.3 As noted in the 2018
Statement, the agencies issue various types of supervisory guidance to their respective supervised institutions, including, but not limited to, interagency statements, advisories, bulletins, policy statements, questions and answers, and frequently asked questions. Supervisory guidance outlines the agencies supervisory expectations or priorities and articulates the agencies general views regarding practices for a given subject area.
Supervisory guidance often provides examples of practices that mitigate risks, or that the agencies generally consider to be consistent with safety-andsoundness standards or other applicable laws and regulations, including those designed to protect consumers.4 The agencies noted in the 2018 Statement that supervised institutions at times request supervisory guidance and that guidance is important to provide clarity to these institutions, as well as supervisory staff, in a transparent way that helps to ensure consistency in the supervisory approach.5
3 See https www.occ.gov/news-issuances/newsreleases/2018/nr-ia-2018-97a.pdf.
4 While supervisory guidance offers guidance to the public on the agencies approach to supervision under statutes and regulations and safe and sound practices, the issuance of guidance is discretionary and is not a prerequisite to an agencys exercise of its statutory and regulatory authorities. This point reflects the fact that statutes and legislative rules, not statements of policy, set legal requirements.
5 The Administrative Conference of the United States ACUS has recognized the important role of guidance documents and has stated that guidance can make agency decision-making more predictable and uniform and shield regulated parties from unequal treatment, unnecessary costs, and unnecessary risk, while promoting compliance with the law. ACUS, Recommendation 20175, Agency Guidance Through Policy Statements at 2
adopted December 14, 2017, available at https
www.acus.gov/recommendation/agency-guidancethrough-policy-statements. ACUS also suggests that policy statements are generally better than legislative rules for dealing with conditions of uncertainty and often for making agency policy accessible. Id. ACUSs reference to policy statements refers to the statutory text of the APA, which provides that notice and comment is not required for general statements of policy. The phrase general statements of policy has commonly been viewed by courts, agencies, and administrative law commentators as including a wide range of agency issuances, including guidance.

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The 2018 Statement restated existing law and reaffirmed the agencies understanding that supervisory guidance does not create binding, enforceable legal obligations. The 2018
Statement reaffirmed that the agencies do not issue supervisory criticisms for violations of supervisory guidance and described the appropriate use of supervisory guidance by the agencies. In the 2018 Statement, the agencies also expressed their intention to 1 limit the use of numerical thresholds in guidance; 2 reduce the issuance of multiple supervisory guidance documents on the same topic; 3
continue efforts to make the role of supervisory guidance clear in communications to examiners and supervised institutions; and 4
encourage supervised institutions to discuss their concerns about supervisory guidance with their agency contact.
On November 5, 2018, the OCC, Board, FDIC, and Bureau each received a petition for a rulemaking Petition, as permitted under the Administrative Procedure Act APA,6 requesting that the agencies codify the 2018 Statement.7
The Petitioners did not submit a petition to the NCUA, which has no supervisory authority over the financial institutions that are represented by Petitioners. The NCUA determined that it was appropriate to join this rulemaking on its own initiative.
References in the preamble to agencies therefore include the NCUA.
The Petition argued that a rule on guidance is necessary to bind future agency leadership and staff to the 2018
Statements terms. The Petition also suggested there are ambiguities in the 2018 Statement concerning how supervisory guidance is used in connection with matters requiring attention, matters requiring immediate attention collectively, MRAs for banks, as well as in connection with other supervisory actions that should be clarified through a rulemaking. As explained in the next section, the NCUA
examiners use a notification similar to an MRA called a Document of Resolution DOR. Finally, the Petition called for the rulemaking to implement changes in the agencies standards for issuing MRAs. Specifically, the Petition requested that the agencies limit the role of MRAs to addressing circumstances in which there is a violation of a statute, 65

U.S.C. 553e.
Petition for Rulemaking on the Role of Supervisory Guidance, available at https bpi.com/
wp-content/uploads/2018/11/BPI_PFR_on_Role_of_
Supervisory_Guidance_Federal_Reserve.pdf.
7 See
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