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Sens. Moran, Manchin and Capito Introduce Bipartisan Legislation to Reform Examination Process for Financial Institutions

Legislation would provide opportunity for independent review of examination process, promote greater uniformity among regulators involved

WASHINGTON – U.S. Senators Jerry Moran (R-Kan.), Joe Manchin (D-W.Va.) and Shelley Moore Capito (R-W.Va.) today introduced The Financial Institutions Examination Fairness and Reform Act (S. 774). The bipartisan legislation would reform the examination process for financial institutions by requiring regulatory agencies to issue examination determinations promptly, as well as give banks and other supervised financial institutions the right to have those determinations reviewed.

“I am proud to introduce the bipartisan Financial Institutions Examination Fairness Reform Act to provide much-needed changes to the financial institution examination process,” Sen. Moran said. “The legislation allows for independent review and promotes greater uniformity among the various regulators. By improving the examination process, banks and credit unions can better serve their local customers and contribute to economic growth in their communities.” 

“An effective and fair examination process of financial institutions is vital to the health of our banking system and is beneficial to the consumers it serves,” Sen. Manchin said. “This commonsense legislation would make sure that any bank or financial institution that undergoes a supervisory exam is allowed to have an impartial third party also review the exam findings before agencies can take action against that company. This independent review would not only strengthen transparency and openness during the review process, but it would also promote greater uniformity among the various regulatory agencies and impose much-needed accountability on those agencies.” 

“By creating a reasonable process for financial institutions to appeal examination reports, our community banks and credit unions will have the clarity they need to provide small businesses with loans, spur investment and create jobs.  Our economy needs certainty and confidence, and this bipartisan legislation puts us on the right track to achieve those goals,” said Sen. Capito.

Specifically, S. 774 would: 

  • Impose reasonable limits on examiners to provide their conclusions to the institutions they examine and to make available upon request the information relied upon for those determinations;
  • Establish an independent examination review director. This individual would be retained by the Federal Financial Examinations Institution Council and would be authorized to address examination complaints and review examination procedures; and
  • Provide financial institutions with the right to seek review of supervisory determinations with the Independent Examination Review Director. The legislation authorizes the director to review the examination record and – at the institution’s request – direct an evidentiary hearing to enable the director to decide whether the agency’s examination determination shall be upheld.

The Financial Institutions Examination Fairness and Reform Act also incorporates important safeguards to ensure that financial institutions will not abuse the review process to delay or evade appropriate supervisory action. An institution can seek review of an agency determination only if the determination is significant – such as a rating downgrade, imposition of a “matter requiring attention,” or suspension of the institution’s ability to open new bank branches or engage in other significant transactions. The review process also incorporates strict time limits.  Finally, S. 774 will not prevent a regulatory agency from imposing supervisory restrictions on an institution or pursuing administrative enforcement of agency rules and regulations. 

The bill is also cosponsored by U.S. Senators Rob Portman (R-Ohio), Kelly Ayotte (R-N.H.) and Steve Daines (R-Mont.). The bill is supported by the American Bankers Association (ABA), Credit Union National Association (CUNA), National Association of Federal Credit Unions (NAFCU), and the Independent Community Bankers of America (ICBA).

Click here to read the full bill text.