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Federal Register / Vol. 86, No. 39 / Tuesday, March 2, 2021 / Rules and Regulations Comments on the Proposed Rule
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A. Overview The five agencies received approximately 30 unique comments concerning the Proposed Rule.14 The FDIC discusses below those comments that are potentially relevant to the FDIC.15 Commenters representing trade associations for banking institutions and other businesses, state bankers associations, individual financial institutions, and one member of Congress expressed general support for the proposed rule. These commenters supported codification of the 2018
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 clarifying the law for institutions and potentially removing ambiguities that could deter the development of 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 orders, 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 examinations and other supervisory activities, examiners may identify unsafe or unsound practices or other deficiencies in risk management, including compliance risk management, or other areas that do not constitute violations of law or regulation. 2018 Statement at 2. The agencies did not intend these deletions to indicate a change in supervisory policy.
14 Of the comments received, some comments were not submitted to all agencies, and some comments were identical. Note that this total excludes comments that were directed at an unrelated rulemaking by the Financial Crimes Enforcement Network of the Department of the Treasury FinCEN. This final rule does not specifically discuss those comments that are only potentially relevant to other agencies.
15 This final rule does not specifically discuss those comments that are only potentially relevant to other agencies.

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they warrant a formal enforcement action. The commenter noted as well that supervisory guidance provides important insight to the industry and ensures consistency in the supervisory approach and that supervised institutions frequently request supervisory guidance. The commenter observed that the COVID19 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 public interest 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 imprudent bank practices 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 banking institutions have wider discretion to ignore supervisory guidance.
B. Scope of Rule Several industry 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 agency that issues them 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 to change an interpretation. A number of commenters requested that the agencies expand the statement to address the
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standards that apply to MRAs and other supervisory criticisms, a suggestion made in the Petition.
C. Role of Guidance Documents Several commenters recommended that the agencies clarify that the practices described in supervisory guidance are merely examples of conduct that may be consistent with statutory and regulatory compliance, 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 practices outlined in that supervisory guidance or interpretive rule as a safe harbor from supervisory criticism. One commenter also requested that the agencies make clear that guidance that goes through public comment, as well as any examples used in guidance, is 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. As an example, according to this commenter, 12 U.S.C. 1831p1 and 12 U.S.C. 1818
recognize the discretionary power conferred on the Federal banking agencies 16 which is separate from the power to issue regulations. The commenter noted that, pursuant to these statutes, regulators may issue cease and desist orders based on 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 Federal banking 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. These commenters suggested that supervisory criticisms 16 The Federal banking agencies are the OCC, Board, and FDIC. 12 U.S.C. 1813.

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