After regulators in September issued a joint statement clarifying that regulatory guidance does not have the force and effect of law, the American Bankers Association and the Bank Policy Institute yesterday submitted a rare petition to each agency calling on them to institutionalize the statement by codifying it in a formal rulemaking. The associations asked regulators specifically to clarify that matters requiring attention, matters requiring immediate attention and other such supervisory actions may only be based on a violation of statute or regulation, and not on a failure to comply with supervisory guidance.
While acknowledging that the interagency statement was “an important step forward” in ensuring that guidance is applied in a consistent and appropriate manner, the associations raised concerns that “it may nevertheless leave room for examiners to continue to base examination criticisms on matters not based in law.” Codifying the interagency statement in a formal rulemaking would help ensure that banks and the public are able to comment on government mandates before they are treated as binding by examiners, the groups said. It would also benefit consumers by providing banks the legal clarity they need to operate and innovate freely, without ambiguity or fear of unknown or unexpected regulatory consequence, they added.
The associations emphasized that while codifying the interagency statement would raise the threshold for the issuance of MRAs or MRIAs and other adverse supervisory actions, it should not limit examiners’ ability to engage with banks constructively on matters that do not rise to that threshold. “In other words, with respect to matters that do not involve a violation of law, a bank’s management is free to design and innovate, while examiners remain free to identify best practices and provide input.”