Banking groups cry foul after FDIC abruptly closes OSA, reinstates SARC

The American Bankers Association and five other banking trade groups this week shared their concern with the FDIC’s decision to eliminate the recently opened Office of Supervisory Appeals and reinstate the Supervision Appeals Review Committee. OSA served as forum for banks to challenge supervisory findings. SARC, in place since the mid-1990s, was replaced following claims that it was ineffective.

“Not only do we believe the SARC is a flawed forum and decision-maker for the intra-agency supervisory appeals process, but the lack of transparency demonstrated by the agency in announcing this decision without any prior notice to the public or opportunity to comment fails to take into account fundamental due-process rights,” the associations wrote.

OSA became fully operational in December last year, following multiyear efforts to establish and fund the office. Within five months, OSA was disbanded during a board meeting in May without “substantive discussion” or any advance public notice, the groups said. The abrupt move “undermines” transparency initiatives championed by FDIC in recent years, the groups wrote, and signals a “significant and troubling departure from the FDIC’s historical practice of promoting open dialogue through the notice and comment process, irrespective of administration.”

FDIC cited staffing issues as one of the primary reasons it shuttered OSA. The associations countered that FDIC could have funded OSA staff on a part-time or hourly contractual basis rather than full-time, adding that the agency “failed to explore alternatives.” The FDIC should resurrect the OSA or delay action on SARC to allow for a notice and comment period, greater due process and to avoid discouraging banks from using the appellate process, the groups advised.