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Federal Register / Vol. 86, No. 28 / Friday, February 12, 2021 / Rules and Regulations
to these institutions, as well as supervisory staff, in a transparent way that helps to ensure consistency in the supervisory approach.5
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 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 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, 82
FR 61728, 61734 Dec. 29, 2017. 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 documents.
6 5 U.S.C. 553e.
7 See Petition for Rulemaking on the Role of Supervisory Guidance, available at https
www.consumerfinance.gov/rules-policy/petitionsrulemaking/bpi-aba-petition/. 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
chose to join the Proposed Rule on its own initiative. References in the preamble to agencies therefore include the NCUA.

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connection with matters requiring attention, matters requiring immediate attention collectively, MRAs, as well as in connection with other supervisory actions that should be clarified through a rulemaking. 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, regulation, or order, or demonstrably unsafe or unsound practices.
II. The Proposed Rule On November 5, 2020, the agencies issued a proposed rule Proposed Rule or Proposal that would have codified the 2018 Statement, with clarifying changes, as an appendix to proposed rule text.8 The Proposed Rule would have superseded the 2018 Statement.
The rule text would have provided that an amended version of the 2018
Statement is binding on each respective agency.
The Petition expressed support for the 2018 Statement and acknowledged that it addresses many issues of concern for the Petitioners relating to the use of supervisory guidance. The Petition expressed concern, however, that the 2018 Statements reference to not basing criticisms on violations of supervisory guidance has led to confusion about whether MRAs are covered by the 2018 Statement.
Accordingly, the agencies proposed to clarify in the Proposed Rule that the term criticize includes the issuance of MRAs and other supervisory criticisms, including those communicated through matters requiring board attention, documents of resolution, and supervisory recommendations collectively, supervisory criticisms.9
As such, the agencies reiterated that examiners will not base supervisory criticisms on a violation of or noncompliance with supervisory guidance.
The agencies noted that, in some situations, examiners may reference including in writing supervisory guidance to provide examples of safe and sound conduct, appropriate consumer protection and risk management practices, and other actions for addressing compliance with laws or regulations. The agencies also reiterated that they will not issue an enforcement action on the basis of a 8 85

FR 70512 Nov. 5, 2020.
agencies use different terms to refer to supervisory actions that are similar to MRAs and Matters Requiring Immediate Attention MRIAs, including matters requiring board attention, documents of resolution, and supervisory recommendations.
9 The
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violation of or non-compliance with supervisory guidance. The Proposed Rule reflected these clarifications.10
The Petition requested further that these supervisory criticisms should not include generic or conclusory references to safety and soundness. The agencies agreed that supervisory criticisms should continue to be specific as to practices, operations, financial conditions, or other matters that could have a negative effect on the safety and soundness of the financial institution, could cause consumer harm, or could cause violations of laws, regulations, final agency orders, or other legally enforceable conditions. Accordingly, the agencies included language reflecting this practice in the Proposed Rule.
The Petition also suggested that MRAs, as well as memoranda of understanding, examination downgrades, and any other formal examination mandate or sanction, should be based only on a violation of a statute, regulation, or order, including a demonstrably unsafe or unsound practice. As noted in the Proposed Rule, examiners all take steps to identify deficient practices before they rise to violations of law or regulation or before they constitute unsafe or unsound banking practices. The agencies stated that they continue to believe that early identification of deficient practices serves the interest of the public and of supervised institutions. Early identification protects the safety and soundness of banks, promotes consumer protection, and reduces the costs and risk of deterioration of financial condition from deficient practices resulting in violations of laws or regulations, unsafe or unsound conditions, or unsafe or unsound banking practices. The Proposed Rule also noted that the agencies have different supervisory processes, including for issuing supervisory criticisms. For these reasons, the 10 The 2018 Statement contains the following sentence: Examiners will not criticize a supervised financial institution for a violation of supervisory guidance. 2018 Statement at 2. As revised in the Proposed Rule, this sentence read as follows:
Examiners will not criticize including through the issuance of matters requiring attention, matters requiring immediate attention, matters requiring board attention, documents of resolution, and supervisory recommendations a supervised financial institution for, and agencies will not issue an enforcement action on the basis of, a violation of or non-compliance with supervisory guidance. Proposed Rule emphasis added. As discussed infra in footnote 11, the Proposed Rule also removed the sentences in the 2018 Statement that referred to citation, which the Petition suggested had been confusing. These sentences were also removed to clarify that the focus of the Proposed Rule related to the use of guidance, not the standards for MRAs.

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