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Federal Register / Vol. 86, No. 28 / Friday, February 12, 2021 / Rules and Regulations
treat adherence to that supervisory guidance or interpretive rule as providing a safe harbor. One commenter also requested that the agencies make clear that guidance that goes through public comment, as well as any examples used in guidance, are not binding.13
One comment that was specifically addressed to the Bureau, from an association of credit unions, stated that the Bureau should refrain from issuing supervisory guidance that adds requirements not explicitly stated in the statute or regulation.
One commenter argued that guidance provides valuable information to supervisors about how their discretion should be exercised and therefore plays an important role in supervision.
D. Supervisory Criticisms Several commenters addressed supervisory criticisms and how they relate to guidance. Some commenters suggested that supervisory criticisms should be specific as to practices, operations, financial conditions, or other matters that could have a negative effect. These commenters suggested that MRAs, memoranda of understanding and any other formal written mandates or sanctions should be based only on a violation of a statute or regulation.
Similarly, these commenters argued that there should be no references to guidance in written formal actions and that banking institutions should be reassured that they will not be criticized or cited for a violation of guidance when no law or regulation is cited. One commenter suggested that it would instead be appropriate to discuss supervisory guidance privately, rather than publicly, potentially during the pre-exam meetings or during examination exit meetings. Another commenter suggested that, while referencing guidance in supervisory criticism may be useful at times, agencies should provide safeguards to prevent such references from becoming the de facto basis for supervisory criticisms. One commenter stated that examiners also should not criticize community banks in their final written examination reports for not complying with best practices unless the criticism involves a violation of bank policy or regulation. The commenter added that industry best practices 13 This commenter also requested that the agencies affirm that they will apply statutory factors while processing applications. The Bureau construes this comment, in context, as referring to the application processes that are common at the Federal banking agencies; to the extent it may refer to applications to the Bureau, the Bureau considers it outside the scope of the Bureaus rulemaking.

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should be transparent enough and sufficiently known throughout the industry before being cited in an examination report. One commenter requested that examiners should not apply large bank practices to community banks that have a different, less complex and more conservative business model.
Commenters that opposed the Proposal did not support restricting supervisory criticism or sanctions to explicit violations of law or regulation.
One commenter expressed concern that requiring supervisors to wait for an explicit violation of law before issuing criticism would effectively erase the line between supervision and enforcement. According to the commenter, it would eliminate the space for supervision as an intermediate practice of oversight and cooperative problem-solving between banks and the regulators who support and manage the banking system. One commenter emphasized the importance of bank supervisors basing their criticisms on imprudent bank practices that may not yet have ripened into violations of laws or rules but which if left unaddressed could pose harm to consumers.
One commenter argued that the agencies should state clearly that guidance can and will be used by supervisors to inform their assessments of banks practices and that it may be cited as, and serve as the basis for, criticisms. According to the commenter, even under the legal principles described in the Proposal, it is permissible for guidance to be used as a set of standards that may inform a criticism, provided that application of the guidance is used for corrective purposes, if not to support an enforcement action.
According to one commenter, the Proposal makes fine conceptual distinctions between, for example, issuing supervisory criticisms on the basis of guidance and issuing supervisory criticisms that make reference to supervisory guidance.
The commenter suggested that is a distinction that it may be difficult for regulated entities to parse in practice.
According to the commenter, a rule that makes such a distinction is likely to have a chilling effect on supervisors attempting to implement policy in the field. According to another commenter, the language allowing examiners to reference supervisory guidance to provide examples is too vague and threatens to marginalize the role of guidance and significantly reduce its usefulness in the process of issuing criticisms designed to correct deficient bank practices.

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E. Issuance and Management of Supervisory Guidance Several commenters made suggestions about how the agencies should issue and manage supervisory guidance.
Some commenters suggested that the agencies should delineate clearly between regulations and supervisory guidance. Commenters encouraged the agencies to regularly review, update, and potentially rescind outstanding guidance. One commenter suggested that the agencies rescind outstanding guidance that functions as rule but has not gone through notice and comment.
One commenter suggested that the agencies memorialize their intent to revisit and potentially rescind existing guidance, as well as limit multiple guidance documents on the same topic.
Commenters suggested that supervisory guidance should be easy to find, readily available, online, and in a format that is user-friendly and searchable.
One commenter encouraged the agencies to issue principles-based guidance that avoids the kind of granularity that could be misconstrued as binding expectations. According to this commenter, the agencies can issue separate frequently asked questions with more detailed information but should clearly identify these as nonbinding illustrations. This commenter also encouraged the agencies to publish proposed guidance for comment when circumstances allow. Another commenter requested that the agencies issue all rules as defined by the Administrative Procedure Act through the notice-and-comment process.
One commenter expressed concern that the agencies will aim to reduce the issuance of multiple supervisory guidance documents and will thereby reduce the availability of guidance in circumstances where guidance would be valuable.
F. Responses to Comments As stated in the Proposed Rule, the 2018 Statement was intended to focus on the appropriate use of supervisory guidance in the supervisory process, rather than the standards for supervisory criticisms. The standards for issuing MRAs and other supervisory actions were, therefore, outside the scope of this rulemaking. For this reason, and for reasons discussed earlier, the final rule does not address the standards for MRAs or other supervisory actions.
With respect to the comments on coverage of interpretive rules, the Bureau agrees with the commenter that interpretive rules do not, alone, have the force and effect of law and must be
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