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Felix Shipkevich September 11, 2018
Supervisory Guidance For Regulated Institutions - Federal Regulation Agencies
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Regulation Agencies Issue Statement Reaffirming the Role of Supervisory Guidance

Five federal regulation agencies today issued a joint statement explaining the role of supervisory guidance for regulated institutions.

The statement from the agencies—the Federal Reserve Board, the Bureau of Consumer Financial Protection, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency—confirms that supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance.  The joint statement explains that supervisory guidance can outline the agencies’ supervisory expectations or priorities and articulate the agencies’general views regarding appropriate practices for a given subject area.

 

Interagency Statement Clarifying the Role of Supervisory Guidance

The Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency (together, the “prudential agencies”) are responsible for promoting safety and soundness and effective consumer compliance at supervised institutions.  The Bureau of Consumer Financial Protection (“Bureau,” and, with the prudential agencies, the “agencies”) is generally responsible for regulating the offering and provision of consumer financial products or services under the federal consumer financial laws.  The agencies are issuing this statement to explain the role of supervisory guidance and to describe the agencies’ approach to supervisory guidance.

 

Difference between supervisory guidance and laws or regulation

The agencies issue various types of supervisory guidance, including interagency statements, advisories, bulletins, policy statements, questions and answers, and frequently asked questions, to their respective supervised institutions.  A law or regulation has the force and effect of law.[1]  Unlike a law or regulation, supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance.  Rather, supervisory guidance outlines the agencies’ supervisory expectations or priorities and articulates the agencies’ general views regarding appropriate practices for a given subject area.  Supervisory guidance often provides examples of practices that the agencies generally consider consistent with safety-and-soundness standards or other applicable laws and regulations, including those designed to protect consumers.  Supervised institutions at times request supervisory guidance, and such guidance is important to provide insight to industry, as well as supervisory staff, in a transparent way that helps to ensure consistency in the supervisory approach.

 

Ongoing agency efforts to clarify the role of supervisory guidance

 

  • The agencies are clarifying the following policies and practices related to supervisory guidance:
  • The agencies intend to limit the use of numerical thresholds or other “bright-lines” in describing expectations in supervisory guidance.  Where numerical thresholds are used, the agencies intend to clarify that the thresholds are exemplary only and not suggestive of requirements.  The agencies will continue to use numerical thresholds to tailor, and otherwise make clear, the applicability of supervisory guidance or programs to supervised institutions, and as required by statute.
  • Examiners will not criticize a supervised financial institution for a “violation” of supervisory guidance.  Rather, any citations will be for violations of law, regulation, or non-compliance with enforcement orders or other enforceable conditions.  During examinations and other supervisory activities, examiners may identify unsafe or unsound practices or other deficiencies in risk management, including compliance risk management, or other areas that do not constitute violations of law or regulation.  In some situations, examiners may reference (including in writing) supervisory guidance to provide examples of safe and sound conduct, appropriate consumer protection and risk management practices, and other actions for addressing compliance with laws or regulations.
  • The agencies also have at times sought, and may continue to seek, public comment on supervisory guidance.  Seeking public comment on supervisory guidance does not mean that the guidance is intended to be a regulation or have the force and effect of law.  The comment process helps the agencies to improve their understanding of an issue, to gather information on institutions’ risk management practices, or to seek ways to achieve a supervisory objective most effectively and with the least burden on institutions.
  • The agencies will aim to reduce the issuance of multiple supervisory guidance documents on the same topic and will generally limit such multiple issuances going forward.
  • The agencies will continue efforts to make the role of supervisory guidance clear in their communications to examiners and to supervised financial institutions, and encourage supervised institutions with questions about this statement or any applicable supervisory guidance to discuss the questions with their appropriate agency contact.

 

[1] Government agencies issue regulations that generally have the force and effect of law.  Such regulations generally take effect only after the agency proposes the regulation to the public and responds to comments on the proposal in a final rulemaking document.

 

This press release first appeared at the BCFP website consumerfinance.gov along with the Interagency Statement on the Role of Supervisory Guidance .pdf found here.

 

MEDIA CONTACTS

BCFP

Samuel Gilford
(202) 435-7673

FDIC

David Barr
(202) 898-6992

Federal Reserve

Darren Gersh
(202) 452-2955

NCUA

John Fairbanks

(703) 518-6336

OCC

Stephanie Collins
(202) 649-6870
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2 thoughts on “Federal Regulation Agencies: Supervisory Guidance For Financial Institutions

  1. But a smiling visitor here to share the love (:, btw outstanding pattern. “Better by far you should forget and smile than that you should remember and be sad.” by Christina Georgina Rossetti.

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