Should an Independent Office Review Complaints & Appeals by Banks About Their Regulatory Exams? (H.R. 4545)

What is H.R. 4545?

(Updated October 7, 2018)

This bill would establish the Office of Independent Examination Review to investigate complaints from financial institutions about regulatory examinations, review the quality of examinations, and adjudicate appeals of determinations made within examinations. It would also set deadlines for regulators to hold exit interviews and issue final examination reports to financial institutions. Under current law, federal financial regulators have their own appeals review processes with varying rules and stipulations.

The office would be established within the Federal Financial Institutions Examination Council.

Argument in favor

The process for banks appealing the findings of regulatory examinations should be consolidated under an independent office so that banks don’t have to file and track multiple different appeals.

Argument opposed

The existing process for banks appealing the findings of financial regulators works just fine, and this bill would let banks escape or delay accountability for violations of federal laws.

Impact

Financial institutions; the Office of Independent Examination Review; and federal financial regulatory agencies.

Cost of H.R. 4545

The CBO estimates that enacting this bill would increase deficits by $123 million over the 2018-2027 period.

Additional Info

In-Depth: Sponsoring Rep Scott Tipton (R-CO) introduced this bill to consolidate the appeals process for financial regulatory examinations under an independent office, rather than each agency having its own appeals process:

“Bringing the examination appeals process under an independent office provides financial institutions with greater certainty that they will receive fair and standard treatment in the appeals process. I’m pleased to work with my colleague Representative Maloney to advance this bipartisan legislation to ensure financial institutions including small banks undergo an effective and fair examination process.”

Original cosponsor, Rep. Carolyn Maloney (D-NY), added:

“In the aftermath of the financial crisis, I heard from countless community banks that they were afraid to appeal exam decisions, because they thought their examiner would retaliate against them. That’s why I’m proud to have worked with Congressman Tipton to introduce this bill that would improve the examination process. This bill ensures that banks are treated fairly by their examiners, and creates a rigorous and independent process for banks to appeal certain exam decisions, which will bring transparency and consistency to the examination process. This improvement will protect the integrity of the banking system, while also improving the fairness of the examination process.”

Some House Democrats opposed this bill in committee, writing:

“H.R. 4545 would enable any bank, regardless of size, to appeal and postpone material supervisory determinations by the bank’s regulator, which include adverse determinations such as a downgrade of a bank’s rating for capital, asset quality, management, earnings, liquidity, and sensitivity to market risks (CAMELS); significant deficiencies in the institution’s Bank Secrecy Act/Anti-Money Laundering (BSA/AML) program; findings related to violations of various regulations; or a downgrade of a bank’s Community Reinvestment Act (CRA) rating… This bill would make it more likely that megabanks would be able to escape or delay accountability for egregious violations of federal laws protecting consumers and the economy.”

This legislation passed the House Financial Services Committee on a 50-10 vote and has the support of seven bipartisan cosponsors, including five Republicans and two Democrats.

Media:

• Sponsoring Rep. Scott Tipton (R-CO) Press Release
  
• CBO Cost Estimate
  
• American Bankers Association (In Favor)
  
• Credit Union National Association (In Favor)