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Federal Register / Vol. 86, No. 28 / Friday, February 12, 2021 / Rules and Regulations
In response to the comment that the agencies should treat examples in guidance as safe harbors from supervisory criticism, the OCC agrees that examples offered in supervisory guidance can provide insight about practices that, in general, may lead to safe and sound operation and compliance with regulations and statutes. The examples in guidance, however, are generalized. When an institution implements examples, examiners must consider the facts and circumstances of that institution in assessing the application of those examples. In addition, the underlying legal principle of supervisory guidance is that it does not create binding legal obligation for either the public or an agency. As such, the OCC does not deem examples used in supervisory guidance to categorically establish safe harbors from supervisory criticism.
In response to the comments that the Proposal may undermine the important role that supervisory guidance can play in informing supervisory criticism and serving to address conditions before those conditions lead to enforcement actions, the OCC agrees that the appropriate use of supervisory guidance generates a more collaborative and constructive regulatory process that supports the safety and soundness and compliance of institutions, thereby diminishing the need for enforcement actions. As noted by ACUS, 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. The OCC does not view the final rule as weakening the role of guidance in the supervisory process and the OCC will continue to use guidance in a robust way to support the safety and soundness of banks and promote compliance with consumer protection laws and regulations.
Further, the OCC does not agree with one commenters assertion that the Proposal made an unclear distinction between, on the one hand, inappropriate supervisory criticism for a violation of or non-compliance with supervisory guidance, and, on the other hand, OCC examiners appropriate use of supervisory guidance to reference examples of safe and sound conduct, appropriate consumer protection and risk management practices, and other actions for addressing compliance with laws or regulations. This approach appropriately implements the principle that institutions are not required to follow supervisory guidance in itself but may find such guidance useful. The OCC disagrees with the commenter that
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institutions and examiners are incapable of understanding this important distinction.
With respect to the comment that visitorial powers do not provide the Federal banking agencies with authority to issue MRAs or other supervisory criticisms, the OCC disagrees. The OCCs visitorial powers are wellestablished. The Supreme Courts decision in Cuomo v. Clearing House Assn L.L.C. explained that the visitation included the exercise of supervisory power. 21 The Court ruled that the power to enforce the law exists separate and apart from the power of visitation. 22 While the Cuomo decision involved the question of which powers may be exercised by state governments and ruled that states could exercise law enforcement powers, but could not exercise visitorial powers, the decision did not dispute that the Federal banking agencies possess both these powers. The Court in Cuomo explained that visitorial powers entailed oversight and supervision, while the Courts earlier decision in Watters v. Wachovia Bank, N.A.
explained that visitorial powers entailed general supervision and control. 23
Accordingly, visitorial powers include the power to issue supervisory criticisms independent of the agencies authority to enforce applicable laws or ensure safety and soundness. For these reasons, the OCC reaffirms the statement in the preamble to the Proposed Rule that such visitorial powers have been conferred through statutory examination and reporting authorities, which facilitate the OCCs identification of supervisory concerns that may not rise to a violation of law, unsafe or unsound practice, or breach of fiduciary duty under 12 U.S.C. 1818. These statutory examination and reporting authorities pre-existed 12 U.S.C. 1818, which neither superseded nor replaced such authorities. The OCC has been vested with statutory examination and reporting authorities with respect to banks under its supervision.24
In response to the comments regarding the role of public comment for 21 Cuomo v. Clearing House Assn L.L.C., 557 U.S.
519, 536 2009.
22 Id. at 533.
23 Watters v. Wachovia Bank, N.A., 550 U.S. 1, 127 2007.
24 The commenters reading of the Federal banking agencies examination and reporting authorities would assert that the Federal banking agencies may examine supervised institutions and require reports, but not make findings based on such examinations and reporting, unless the finding is sufficient to warrant a formal enforcement action under the standard set out in 12 U.S.C. 1818. This reading is inconsistent with the history of federal banking supervision, including as described in the cases cited in the Proposed Rule.

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supervisory guidance, the OCC notes that it has made clear through the 2018
Statement and in this final rule that supervisory guidance including guidance that goes through public comment does not create binding, enforceable legal obligations. Rather, the OCC in some instances issues supervisory guidance for comment in order to improve its understanding of an issue, gather information, or seek ways to achieve a supervisory objective most effectively. Similarly, examples that are included in supervisory guidance including guidance that goes through public comment are not binding on institutions. Rather, these examples are intended to be illustrative of ways a supervised institution may implement safe and sound practices, appropriate consumer protection, prudent risk management, or other actions in furtherance of compliance with laws or regulations. Relatedly, the OCC does not agree with one comment that it should use notice and comment procedures, without exception, to issue all rules as defined by the APA, which would include supervisory guidance. Congress has established longstanding exceptions in the APA from the notice and comment process for certain rules, including for general statements of policy like supervisory guidance and for interpretive rules. As one court has explained, Congress intended to accommodate situations where the policies promoted by public participation in rulemaking are outweighed by the countervailing considerations of effectiveness, efficiency, expedition and reduction in expense. 25
With respect to the commenters request that the agencies affirm that they will apply statutory factors while processing applications, the OCC
affirms that the agency will continue to consider and apply all applicable statutory factors when processing applications.
In response to the question raised by some commenters concerning potential confusion between supervisory guidance and interpretive rules, the OCC notes that interpretive rules are outside the scope of the rulemaking. In addition, as stated earlier, interpretive rules do not, alone, have the force and effect of law and must be rooted in, and derived from, a statute or regulation. While interpretive rules and supervisory guidance are similar in lacking the force and effect of law, 25 Am. Hosp. Assn v. Bowen, 834 F.2d 1037, 1045
D.C. Cir. 1987. The specific contours of these exceptions are the subject of an extensive body of case law.

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