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Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Rules and Regulations
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inconsistent application of guidance comprised of credit union officials and staff.
One commenter stated that the NCUA
Interpretive Rules and Policy Statements IRPS are part exempted interpretive rules and covered policy statements. NCUA might consider explicitly identifying existing and future issuances as either covered supervisory guidance or exempt interpretive rule to provide clarity for stakeholders.
B. Comments to All the Agencies Including the NCUA
In addition, the agencies received 30
comments concerning the Proposed Rule.19 Commenters representing trade associations for banking institutions and other businesses, state bankers associations, individual financial institutions, and one member of Congress expressed support for the proposed rule. These commenters supported codification of the 2018
Interagency Statement and the reiteration by the agencies that guidance does not have the force of law and cannot give rise to binding, enforceable legal obligations. One of these commenters stated that the proposal would serve the interests of consumers and competition by allowing institutions to know what the law is and to develop innovative products that serve consumers and business clients, without uncertainty regarding potential regulatory consequences. These commenters expressed strong support as well for the clarification in the Proposed Rule that the Agencies will not criticize, including through the issuance of matters requiring attention, a supervised financial institution for a violation of, or non-compliance with, supervisory guidance.
One commenter agreed with the agencies that supervisory criticisms should not be limited to violation of statutes, regulations, or order, including a demonstrable unsafe or unsound practice and that supervisory guidance remains a beneficial tool to communicate supervisory expectations to the industry. The commenter stated that the proactive identification of supervisory criticism or deficiencies that do not constitute violations of law facilitates forward-looking supervision, which helps address problems before they warrant a formal enforcement action. The commenter noted as well that supervisory guidance provides 19 Of the comments received, some comments were not submitted to all agencies, some comments were identical, and many comments were directed at an unrelated rulemaking by the Financial Crimes Enforcement Network of the Department of the Treasury FinCEN.

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important insight to industry and ensures consistency in the supervisory approach and that supervised institutions frequently request supervisory guidance. The commenter observed that the pandemic has amplified the requests for supervisory guidance and interpretation, and that it is apparent institutions want clarity and guidance from regulators.
Two commenters, both advocacy groups, opposed the proposed rule, suggesting that codifying the 2018
Statement may undermine the important role that supervisory guidance can play by informing supervisory criticism, rather than merely clarifying that it will not serve as the basis for enforcement actions.
One commenter stated that it is essential for agencies to have the prophylactic authority to base criticisms on improper practices by financial institutions that may not yet have ripened into violations of law or significant safety and soundness concerns. The commenter stated that this is particularly important with respect to large banks, where delay in addressing concerns could lead to a broader crisis. One commenter stated that the agencies have not explained the benefits that would result from the rule or demonstrated how the rule will promote safety and soundness or consumer protection. The commenter argued that supervision is different from other forms of regulation and requires supervisory discretion, which could be constrained by the rule. One of these commenters argued that the proposal would send a signal that financial institutions have wider discretion to ignore supervisory guidance.
B. Scope of Rule Several commenters requested that the Proposed Rule cover interpretive rules and clarify that interpretive rules do not have the force and effect of law.
One commenter stated that the agencies should clarify whether they believe that interpretive rules can be binding. The commenter argued that, under established legal principles, interpretive rules can be binding on the issuing agency but not on the public. Some commenters suggested that the agencies follow ACUS recommendations for issuing interpretive rules and that the agencies should clarify when particular guidance documents are or are not interpretive rules and allow the public to petition and change an interpretation.
A number of commenters requested that the agencies expand the statement to address the standards that apply to MRAs and other supervisory criticisms such as DORs, a suggestion made in the Petition.

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C. Role of Guidance Documents Several commenters recommended that the agencies clarify that the practices described in supervisory guidance are merely examples of compliant conduct, not expectations that may form the basis for supervisory criticism. One commenter suggested that the agencies state that when agencies offer examples of safe and sound conduct, compliance with consumer protection standards, appropriate risk management practices, or acceptable practices through supervisory guidance or interpretive rules, the Agencies will treat adherence to that supervisory guidance or interpretive rule as deemed compliance.
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. The commenter also requested that the agencies affirm that they will apply statutory factors while processing applications.
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.
According to this commenter, 12 U.S.C.
1831p1 and 12 U.S.C. 1818 recognize the discretionary power conferred on banking agencies separate from the power to issue regulations. The commenter noted that, pursuant to these statutes, regulators may issue cease and desist orders based on a reasonable cause to believe that an institution has engaged, is engaging or is about to engage in an unsafe and unsound practice, separately and apart from whether the institution has technically violated a law or regulation. The commenter added that Congress entrusted the agencies with the power to determine whether practices are unsafe and unsound and attempt to halt such practices through supervision, even if a specific case may not constitute a violation of a written law or regulation.
D. Supervisory Criticisms Several commenters addressed supervisory criticisms and how they relate to guidance. Commenters suggested that supervisory criticisms should be specific as to practices, operations, financial conditions, or other matters that could have a negative effect. 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, commenters argued that there should be no references to guidance in
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