Financial Institutions Examination Fairness and Reform Act - Amends the Federal Financial Institutions Examination Council Act of 1978 to require a federal financial institutions regulatory agency to make a final examination report to a financial institution within 60 days of the later of: (1) the exit interview for an examination of the institution, or (2) the provision of additional information by the institution relating to the examination.
Sets a deadline for the exit interview if a financial institution is not subject to a resident examiner program.
Sets forth examination standards for financial institutions.
Prohibits federal financial institutions regulatory agencies from requiring a well capitalized financial institution to raise additional capital in lieu of an action prohibited by the examination standards.
Establishes in the Federal Financial Institutions Examination Council an Office of Examination Ombudsman.
Grants a financial institution the right to appeal a material supervisory determination contained in a final report of examination.
Requires the Ombudsman to determine the merits of the appeal on the record, after an opportunity for a hearing before an independent administrative law judge.
Declares the decision by the Ombudsman on an appeal to: (1) be the final agency action, and (2) bind the agency whose supervisory determination was the subject of the appeal and the financial institution making the appeal.
Amends the Riegle Community Development and Regulatory Improvement Act of 1994 to require: (1) the Consumer Financial Protection Bureau (CFPB) to establish an independent intra-agency appellate process in connection with the regulatory appeals process; and (2) appropriate safeguards to protect an insured depository institution or insured credit union from retaliation by the CFPB, the National Credit Union Administration (NCUA) Board, or any other federal banking agency for exercising its rights.
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 2160 Introduced in Senate (IS)]
112th CONGRESS
2d Session
S. 2160
To improve the examination of depository institutions, and for other
purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 6, 2012
Mr. Moran (for himself and Mr. Manchin) introduced the following bill;
which was read twice and referred to the Committee on Banking, Housing,
and Urban Affairs
_______________________________________________________________________
A BILL
To improve the examination of depository institutions, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Financial Institutions Examination
Fairness and Reform Act''.
SEC. 2. TIMELINESS OF EXAMINATION REPORTS.
The Federal Financial Institutions Examination Council Act of 1978
(12 U.S.C. 3301 et seq.) is amended by adding at the end the following:
``SEC. 1012. TIMELINESS OF EXAMINATION REPORTS.
``(a) In General.--
``(1) Final examination report.--A Federal financial
institutions regulatory agency shall provide a final
examination report to a financial institution not later than 60
days after the later of--
``(A) the exit interview for an examination of the
institution; or
``(B) the provision of additional information by
the institution relating to the examination.
``(2) Exit interview.--If a financial institution is not
subject to a resident examiner program, the exit interview
shall occur not later than the end of the 9-month period
beginning on the commencement of the examination, except that
such period may be extended by the Federal financial
institutions regulatory agency by providing written notice to
the institution and the Office of Examination Ombudsman
describing with particularity the reasons that a longer period
is needed to complete the examination.
``(b) Examination Materials.--Upon the request of a financial
institution, the Federal financial institutions regulatory agency shall
include with the final report under this section an appendix listing
all examination or other factual information relied upon by the agency
in support of a material supervisory determination.''.
SEC. 3. EXAMINATION STANDARDS.
(a) In General.--The Federal Financial Institutions Examination
Council Act of 1978 (12 U.S.C. 3301 et seq.) is amended by adding at
the end the following:
``SEC. 1013. EXAMINATION STANDARDS.
``(a) In General.--In the examination of financial institutions--
``(1) a commercial loan shall not be placed in non-accrual
status solely because the collateral for such loan has
deteriorated in value;
``(2) a modified or restructured commercial loan shall be
removed from non-accrual status if the borrower demonstrates
the ability to perform on such loan over a maximum period of 6
months, except that with respect to loans on a quarterly,
semiannual, or longer repayment schedule such period shall be a
maximum of 3 consecutive repayment periods;
``(3) a new appraisal on a performing commercial loan shall
not be required unless an advance of new funds is involved;
``(4) in classifying a commercial loan in which there has
been deterioration in collateral value, the amount to be
classified shall be the portion of the deficiency relating to
the decline in collateral value and repayment capacity of the
borrower.
``(b) Well Capitalized Institutions.--The Federal financial
institutions regulatory agencies may not require a financial
institution that is well capitalized to raise additional capital in
lieu of an action prohibited under subsection (a).
``(c) Consistent Loan Classifications.--The Federal financial
institutions regulatory agencies shall develop and apply identical
definitions and reporting requirements for non-accrual loans.''.
(b) Definition of Material Supervisory Determination.--Section
309(f)(1)(A) of the Riegle Community Development and Regulatory
Improvement Act of 1994 (12 U.S.C. 4806(f)(1)(A)) is amended--
(1) in clause (ii), by striking ``and'' at the end; and
(2) by inserting after clause (iii) the following:
``(iv) any issue specifically listed in an
exam report as a matter requiring attention by
the institution's management or board of
directors; and''.
SEC. 4. EXAMINATION OMBUDSMAN.
(a) In General.--The Federal Financial Institutions Examination
Council Act of 1978 (12 U.S.C. 3301 et seq.) is amended by adding at
the end the following:
``SEC. 1014. OFFICE OF EXAMINATION OMBUDSMAN.
``(a) Establishment.--There is established in the Council an Office
of Examination Ombudsman.
``(b) Head of Office.--There is established the position of the
Ombudsman, who shall serve as the head of the Office of Examination
Ombudsman, and who shall be hired separately by the Council and shall
be independent from any member agency of the Council.
``(c) Staffing.--The Ombudsman is authorized to hire staff to
support the activities of the Office of Examination Ombudsman.
``(d) Duties.--The Ombudsman shall--
``(1) receive and, at the Ombudsman's discretion,
investigate complaints from financial institutions, their
representatives, or another entity acting on behalf of such
institutions, concerning examinations, examination practices,
or examination reports;
``(2) hold meetings, at least once every three months and
in locations designed to encourage participation from all
sections of the United States, with financial institutions,
their representatives, or another entity acting on behalf of
such institutions, to discuss examination procedures,
examination practices, or examination policies;
``(3) review examination procedures of the Federal
financial institutions regulatory agencies to ensure that the
written examination policies of those agencies are being
followed in practice and adhere to the standards for
consistency established by the Council;
``(4) conduct a continuing and regular program of
examination quality assurance for all examination types
conducted by the Federal financial institutions regulatory
agencies;
``(5) process any supervisory appeal initiated under
section 1015 or section 309(e) of the Riegle Community
Development and Regulatory Improvement Act of 1994; and
``(6) report annually to the Committee on Financial
Services of the House of Representatives, the Committee on
Banking, Housing, and Urban Affairs of the Senate, and the
Council, on the reviews carried out pursuant to paragraphs (3)
and (4), including compliance with the requirements set forth
in section 1012 regarding timeliness of examination reports,
and the Council's recommendations for improvements in
examination procedures, practices, and policies.
``(e) Confidentiality.--The Ombudsman shall keep confidential all
meetings, discussions, and information provided by financial
institutions.''.
(b) Definition.--Section 1003 of the Federal Financial Institutions
Examination Council Act of 1978 (12 U.S.C. 3302) is amended--
(1) in paragraph (2), by striking ``and'' at the end;
(2) in paragraph (3), by adding ``and'' at the end; and
(3) by adding at the end the following:
``(4) the term `Ombudsman' means the Ombudsman established
under section 1014.''.
SEC. 5. RIGHT TO APPEAL BEFORE AN INDEPENDENT ADMINISTRATIVE LAW JUDGE.
The Federal Financial Institutions Examination Council Act of 1978
(12 U.S.C. 3301 et seq.) is amended by adding at the end the following:
``SEC. 1015. RIGHT TO APPEAL BEFORE AN INDEPENDENT ADMINISTRATIVE LAW
JUDGE.
``(a) In General.--A financial institution shall have the right to
appeal a material supervisory determination contained in a final report
of examination.
``(b) Notice.--
``(1) Timing.--A financial institution seeking an appeal
under this section shall file a written notice with the
Ombudsman within 60 days after receiving the final report or
examination that is the subject of such appeal.
``(2) Identification of determination.--The written notice
shall identify the material supervisory determination that is
the subject of the appeal, and a statement of the reasons why
the institution believes that the determination is incorrect or
should otherwise be modified.
``(3) Information to be provided to institution.--Any
information relied upon by the agency in the final report that
is not in the possession of the financial institution may be
requested by the financial institution and shall be delivered
promptly by the agency to the financial institution.
``(c) Hearing Before Independent Administrative Law Judge.--
``(1) In general.--The Ombudsman shall determine the merits
of the appeal on the record, after an opportunity for a hearing
before an independent administrative law judge.
``(2) Hearing procedures.--If a hearing is requested by the
financial institution, the hearing shall--
``(A) take place not later than 60 days after the
notice of the appeal was received by the Ombudsman; and
``(B) be conducted pursuant to the procedures set
forth under sections 556 and 557 of title 5, United
States Code.
``(3) Judge recommendation; standard of review.--In any
hearing under this subsection--
``(A) the administrative law judge shall recommend
to the Ombudsman what determination should be made; and
``(B) in making such recommendation, the
administrative law judge shall not defer to the
opinions of the examiner or agency, but shall
independently determine the appropriateness of the
agency's decision based upon the relevant statutes,
regulations, and other appropriate guidance.
``(d) Final Decision.--A decision by the Ombudsman on an appeal
under this section shall--
``(1) be made not later than 60 days after the record has
been closed; and
``(2) be final agency action, and shall bind the agency
whose supervisory determination was the subject of the appeal
and the financial institution making the appeal.
``(e) Report.--The Ombudsman shall report annually to the Committee
on Financial Services of the House of Representatives, the Committee on
Banking, Housing, and Urban Affairs of the Senate on actions taken on
appeals under this section, including the types of issues that
financial institutions have appealed and the results of those appeals.
In no case shall such a report contain information about individual
financial institutions or any confidential or privileged information
shared by financial institutions.
``(f) Retaliation Prohibited.--A Federal financial institutions
regulatory agency may not--
``(1) retaliate against a financial institution, including
service providers, or any institution-affiliated party, for
exercising appellate rights under this section; or
``(2) delay or deny any agency action that would benefit a
financial institution or any institution-affiliated party on
the basis that an appeal under this section is pending under
this section.''.
SEC. 6. ADDITIONAL AMENDMENTS.
(a) Riegle Community Development and Regulatory Improvement Act of
1994.--Section 309 of the Riegle Community Development and Regulatory
Improvement Act of 1994 (12 U.S.C. 4806) is amended--
(1) in subsection (a), by inserting after ``appropriate
Federal banking agency'' the following: ``, the Bureau of
Consumer Financial Protection,'';
(2) in subsection (b)--
(A) in paragraph (2), by striking ``the appellant
from retaliation by agency examiners'' and inserting
``the insured depository institution or insured credit
union from retaliation by an agency referred to in
subsection (a)'';
(B) by redesignating paragraphs (1) and (2) as
subparagraphs (A) and (B), respectively, and adjusting
the margins accordingly;
(C) by striking ``In establishing'' and inserting
the following:
``(1) In general.--In establishing''; and
(D) by adding at the end the following:
``(2) Retaliation.--For purposes of this subsection and
subsection (e), retaliation includes delaying consideration of,
or withholding approval of, any request, notice, or application
that otherwise would have been approved, but for the exercise
of the institution's or credit union's rights under this
section.''; and
(3) in subsection (e)(2)--
(A) in subparagraph (B), by striking ``and'' at the
end;
(B) in subparagraph (C), by striking the period and
inserting ``; and''; and
(C) by adding at the end the following:
``(D) ensure that appropriate safeguards exist for
protecting the insured depository institution or
insured credit union from retaliation by any agency
referred to in subsection (a) for exercising its rights
under this subsection.''.
(b) Federal Deposit Insurance Act.--Section 18(x) of the Federal
Deposit Insurance Act (12 U.S.C. 1828(x)) is amended by inserting ``the
Bureau of Consumer Financial Protection,'' before ``any Federal banking
agency'' each place that term appears.
(c) Federal Credit Union Act.--Section 205(j) of the Federal Credit
Union Act (12 U.S.C. 1785(j)) is amended by inserting ``the Bureau of
Consumer Financial Protection,'' before ``the Administration'' each
place that term appears.
(d) Technical Corrections.--The Federal Financial Institutions
Examination Council Act of 1978 (12 U.S.C. 3301 et seq.) is amended--
(1) in section 1003(1) (12 U.S.C. 3302(1)), by striking
``the Office of Thrift Supervision,''; and
(2) in section 1005 (12 U.S.C. 3304), by striking ``One-
fifth'' and inserting ``One-fourth''.
<all>
Introduced in Senate
Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
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