U.S. Sens. Jerry Moran (R-KS) and Bill Hagerty (R-TN) introduced legislation in the Senate that will help create a fair appeals process for banks and increase transparency for the bank examination process.
The Fair Audits and Inspections for Regulators’ (FAIR) Exams Act would bring greater accountability to bank and credit union examinations. It seeks to do this by establishing statutory timelines for examinations and examination reports, creating a prudential private letter ruling, and creating a robust appeals process if there is a legitimate disagreement between a regulator and the institutions they oversee. Further, the FAIR Exams Act would provide small lenders with more clarity and representation, allowing them to receive results faster and more transparently.
“A fair and effective supervisory examination process for financial institutions is critical to maintaining a healthy and transparent financial system,” Moran said. “This legislation would bring much-needed transparency to the examination process to help make certain all banks, particularly community banks in rural communities, are treated fairly and have access to a rigorous appeals process free from bias.”
Specifically, the FAIR Exams Act would:
- Require the appropriate regulatory agencies to issue timely responses to banks and credit unions during the examinations process;
- Establish a prudential private letter ruling process allowing financial institutions to obtain binding written guidance from regulators on proposed activities and regulatory interpretations;
- Create a three-person Independent Examination Review Board within the Federal Financial Institutions Examination Council (FFIEC) to address examination complaints and procedures;
- Require the appropriate federal financial institutions regulatory agency, upon request, to provide the examination and factual information relied upon in support of a material supervisory determination; and
- Provide financial institutions with the right to an independent appeal of material supervisory determinations, including a de novo review by the Board, with binding decisions and protections against regulatory retaliation.
“ICBA and the nation’s community banks applaud Sen. Moran for his newly introduced legislation to provide due process for banks appealing supervisory decisions, which will promote trust and accountability in supervisory appeals,” Rebeca Romero Rainey, president and CEO, Independent Community Bankers of America, said. “By establishing an Office of Independent Examination Review within the FFIEC to review material supervisory determinations, the FAIR Exams Act will help ensure checks and balances within the supervisory bank examination process in support of a healthy and transparent financial system.”
The bill is also supported by the American Bankers Association, America’s Credit Unions, the Consumer Bankers Association, and the U.S. Chamber of Commerce.
“We commend Sen. Moran and his cosponsors for introducing the FAIR Exams Act, which would improve transparency in the examination process and increase accountability for examiners,” Rob Nichols, president and CEO, American Bankers Association, said. “This important legislation will make the examination process fairer and ultimately contribute to a stronger financial system.”