83 FR 8391 - Internal Appeals Process for Material Supervisory Determinations and Policy Statement Regarding the Ombudsman for the Federal Reserve System

FEDERAL RESERVE SYSTEM

Federal Register Volume 83, Issue 39 (February 27, 2018)

The Board of Governors of the Federal Reserve System (``Board'') is inviting comments on proposed amendments to its guidelines on an internal appeals process for institutions wishing to appeal an adverse material supervisory determination and to its policy regarding the Ombudsman for the Federal Reserve System.

[Federal Register Volume 83, Number 39 (Tuesday, February 27, 2018)]
[Proposed Rules]
[Pages 8391-8396]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-03907]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 83, No. 39 / Tuesday, February 27, 2018 / 
Proposed Rules

[[Page 8391]]



FEDERAL RESERVE SYSTEM

12 CFR Chapter II

[Docket No. OP-1597]


Internal Appeals Process for Material Supervisory Determinations 
and Policy Statement Regarding the Ombudsman for the Federal Reserve 
System

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed policy statement; request for comments.

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SUMMARY: The Board of Governors of the Federal Reserve System 
(``Board'') is inviting comments on proposed amendments to its 
guidelines on an internal appeals process for institutions wishing to 
appeal an adverse material supervisory determination and to its policy 
regarding the Ombudsman for the Federal Reserve System.

DATES: Comments should be received April 30, 2018.

ADDRESSES: You may submit comments, identified by Docket No. OP-1597 by 
any of the following methods:
     Agency Web Site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Email: [email protected]. Include the 
docket number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Ann E. Misback, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue NW, 
Washington, DC 20551.
    All public comments will be made available on the Board's website 
at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper form in Room 3515, 1801 K Street (between 18th and 19th Streets 
NW), Washington, DC 20006 between 9:00 a.m. and 5:00 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Jason A. Gonzalez, Special Counsel, 
(202) 452-3275, or Jay Schwarz, Senior Counsel, (202) 452-2970, Legal 
Division, Ryan Lordos, Deputy Associate Director, (202) 452-2961, 
Supervision & Regulation, or Suzanne Killian, Senior Associate 
Director, (202) 452-2090, or Carol Evans, Associate Director, (202) 
452-2051, Division of Consumer and Community Affairs, for matters 
relating to the appeals process; and Margie Shanks, Ombudsman, (202) 
452-3584, or Jay Schwarz, Senior Counsel, (202) 452-2970, Legal 
Division, for matters relating to the functions of the Ombudsman. 
Telecommunications Device for the Deaf (TDD) users may call (202) 263-
4869.

SUPPLEMENTARY INFORMATION:

I. Background

    The Board of Governors of the Federal Reserve System (``Board'') is 
committed to maintaining an effective independent, intra-agency 
appellate process to allow institutions to seek review of material 
supervisory determinations. The Board is also committed to maintaining 
an effective Ombudsman to serve as a resource for individuals and 
institutions that are affected by the Federal Reserve's regulatory and 
supervisory actions.
    The Board first established guidelines for an appeals process in 
March 1995, when after a period of public notice and comment, the Board 
published final guidelines to implement Section 309 of the Riegle 
Community Development and Regulatory Improvement Act of 1994 (the 
``Riegle Act''), 12 U.S.C. 4806, which governs the appeals requirements 
for Federal banking agencies. The existing guidelines provide that all 
institutions that are subject to Federal Reserve oversight, including 
bank holding companies, U.S. agencies and branches of foreign banks and 
Edge corporations, may appeal any material supervisory determination 
(60 FR 16470 (March 30, 1995)).
    In general, the existing guidelines provide that any institution 
supervised by the Federal Reserve System (``Federal Reserve'') may file 
a written appeal of any material supervisory determination. Appeals 
will then be decided within a specified time frame by a review panel 
selected by the Reserve Bank, in consultation with Board staff, and 
comprised of persons who are not employed by the Reserve Bank and have 
not participated in, or reported to the persons who made the material 
supervisory determination under review. An institution is granted the 
further right to appeal an adverse decision by the review panel to the 
Reserve Bank President and ultimately to a member of the Board. The 
existing guidelines also have safeguards to protect institutions that 
file appeals from examiner retaliation.
    The guidelines apply to any ``material supervisory determination,'' 
which includes any material matter relating to the examination or 
inspection process. The only matters excluded from this appeals process 
are those matters, such as the imposition of a prompt corrective action 
directive or a cease and desist order or other formal actions, for 
which an alternative, independent process of appeal exists. As noted in 
the existing guidelines, institutions are encouraged to express 
questions or concerns about supervisory determinations during the 
course of an inspection or examination, consistent with the 
longstanding Federal Reserve practice of resolving problems informally 
during the course of the inspection or examination process.
    The Board's existing Ombudsman policy was adopted in August 1995. 
It specifies the responsibilities of the Ombudsman, which include 
serving as a point of contact for complaints regarding any System 
action, referring complaints to the appropriate person, and 
investigating and resolving complaints of retaliation.

II. Overview of Proposed Changes

Appeals Guidelines

    Since 1995, the Board has had the opportunity to observe the 
operation of the appeals guidelines over a significant period of time 
and receive feedback from supervised institutions. Based on that 
experience and feedback, the Board is now proposing to amend its 
appellate guidelines in several ways. In particular, the proposed 
revisions are designed to improve and expedite the appeals process, 
particularly for institutions that are in troubled condition. In doing 
so, the proposed revisions attempt to strike

[[Page 8392]]

an equitable balance among accommodating the interests of the 
institutions the Federal Reserve supervises in a substantive review of 
material supervisory determinations, the institutions' interest in 
achieving a swift resolution of any material supervisory determination 
in dispute, and the interests of both an appealing institution and the 
Federal Reserve in the efficient use of limited resources.
    The Board's current appeals process was designed with three levels 
of appeal in an attempt to ensure objectivity in the appeals process. 
However, experience has shown that objectivity can be ensured with a 
more streamlined and efficient process. With these goals in mind, the 
proposal reduces the levels of appeal from three to two and enhances 
independent review of the matter by providing that System and Board 
experts not affiliated with the affected Reserve Bank review the matter 
at both appeals levels.
    In addition to removing one level of appeal, the proposed revisions 
address a timing conflict between the Prompt Corrective Action 
(``PCA'') framework under section 38 of the Federal Deposit Insurance 
Act and the Board's existing appeals process. PCA requires that, no 
later than 90 days after an insured depository institution becomes 
critically undercapitalized, the appropriate Federal banking agency 
must either appoint a receiver for the institution or take such other 
action that the Board determines, with the concurrence of the Federal 
Deposit Insurance Corporation (``FDIC''), would better achieve the 
purposes of PCA. Although the banking agency's decision to appoint a 
receiver for a critically undercapitalized institution is not 
appealable under the Riegle Act, some material supervisory 
determinations (such as reclassifications of loans) may cause an 
institution to become critically undercapitalized and, unless reversed, 
result in receivership.
    The revised process would establish an accelerated process for 
appeals that relate to or cause an institution to become critically 
undercapitalized under the PCA framework to better assure that a review 
of an adverse material supervisory determination occurs within the PCA 
time frame of 90 days. The goal of this accelerated process is to 
provide a thorough, adequate, and independent review of the material 
supervisory determination that places the institution at risk of 
receivership. Notwithstanding the proposed changes, situations may 
arise that would prevent an appeal from being completed before PCA 
requires a receivership to be imposed. In these situations, the 
existence of an outstanding appeal would not prevent the Board from 
meeting its statutorily mandated obligation under PCA to appoint a 
receiver, in which case an appeal will become moot.
    The revised process also establishes specific standards of review 
to be applied in the two levels of appeal. The panel that reviews the 
initial appeal must approach the determination being appealed as if no 
determination had previously been made. The initial review panel will 
consider a record that includes any relevant materials submitted by the 
appealing institution and Federal Reserve staff. Under this standard, 
the panel will have the discretion to rely on examination workpapers 
and other materials developed by Federal Reserve staff during an 
examination.
    If the appealing institution continues to have concerns regarding 
the material supervisory determination following the initial review 
panel's decision, the appealing institution may request a subsequent 
final review conducted by a review panel comprised primarily of Board 
staff. The final review panel will consider whether the decision of the 
initial review panel is reasonable and supported by a preponderance of 
the evidence in the record, but will not seek to augment the record 
with new information. In order to maximize transparency, the decision 
of the final review panel will be made public.
    The Board welcomes comment on all aspects of the revised 
guidelines, including, in particular, on (i) the standards of review 
that are proposed for the two review panels, (ii) the nature and 
composition of the review panels, (iii) the record that the panels may 
consider, and (iv) the timeline that is proposed to take PCA into 
account.

Ombudsman Policy

    The Board is considering making changes to the Ombudsman policy in 
conjunction with the changes to the appeals guidelines. Currently, the 
Ombudsman is the initial recipient of all complaints pertaining to the 
supervisory process, which may include an appeal request. The proposed 
revisions would formalize this practice and allow the Ombudsman to 
attend hearings or deliberations relating to the appeal as an observer, 
if requested by the institution or Federal Reserve personnel. In 
addition, the proposed revisions specify that the Ombudsman's role is 
to be the decision-maker with respect to claims of retaliation. The 
proposal also emphasizes the Ombudsman's availability to facilitate the 
informal resolution of concerns that could ultimately lead to formal 
appeals, clarifies the Ombudsman's role in addressing complaints 
regarding appeals of consumer complaints, and provides for tracking of 
complaints made by regulated institutions.
    The Board welcomes comment on all aspects of the Ombudsman policy.
    The Appeals guidelines and Ombudsman policy for the Federal Reserve 
System are attached as Exhibit A and Exhibit B, respectively.

    By order of the Board of Governors of the Federal Reserve 
System, February 21, 2018.
Ann E. Misback,
Secretary of the Board.

Exhibit A

GUIDELINES FOR APPEALS OF MATERIAL SUPERVISORY DETERMINATIONS

    The Board is committed to maintaining an independent, intra-
agency process to review appeals of material supervisory 
determinations that complies with Section 309 of the Riegle 
Community Development and Regulatory Improvement Act of 1994, 12 
U.S.C. 4806.
    The purpose of these guidelines is to establish a comprehensive 
appellate process for material supervisory determinations. In order 
to ensure that institutions will be granted the same appellant 
rights regardless of the Federal Reserve district in which they 
reside, appeals will be administered using procedures that are 
consistent with these guidelines. These guidelines include an 
accelerated review process to improve their alignment with the PCA 
framework under section 38 of the Federal Deposit Insurance Act.

A. In General

    Any institution about which the Federal Reserve makes a material 
supervisory determination is eligible to utilize the appeals 
process. An eligible institution includes a state member bank, bank 
holding company and its nonbank subsidiaries, U.S. agency or branch 
of a foreign bank, Edge and agreement corporation, savings and loan 
holding company, third party electronic data processing servicer, 
systemically important nonbanking financial organization identified 
by the Financial Stability Oversight Council, and any other entity 
examined or inspected by the Federal Reserve.
    An appeal under these guidelines may be made of any material 
supervisory determination. A ``material supervisory determination'' 
includes, but is not limited to, any material determination relating 
to examination or inspection composite ratings, material examination 
or inspection component ratings, the adequacy of loan loss reserves 
and/or capital, significant loan classification, accounting 
interpretation, and Community Reinvestment Act (including component 
ratings) and consumer compliance rating. The term does not include 
any supervisory determination for which an independent right of 
appeal exists. Excluded actions include PCA directives issued 
pursuant to section 38 of the Federal Deposit Insurance Act (the FDI 
Act), an action to impose administrative enforcement actions

[[Page 8393]]

under the FDI Act, the Home Owners' Loan Act of 1933, the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, the Bank Holding 
Company Act of 1956 (the BHC Act) or other applicable act, a capital 
directive, and an order related to approval or denial of a 
transaction issued pursuant to section 3 or 4 of the BHC Act. Prior 
to a material supervisory determination being made, it is expected 
that the supervised institution will have provided all available 
information it believes to be relevant to the examination staff to 
assist them in making the determination.

B. General Procedures for Appealing a Material Supervisory 
Determination

    In general, the appeals process is an informal process that is 
not subject to the adjudicative provisions of the Administrative 
Procedures Act (5 U.S.C. 554-557). An appeal of a material 
supervisory determination shall be filed and considered pursuant to 
the following procedures:
    (1) Authorization to File. Any appeal must be approved by the 
board of directors of the eligible institution, or in the case of a 
U.S. agency or branch of a foreign bank, the senior management or 
person(s) responsible for the bank's U.S. operations.
    (2) Timelines and Contents. The institution must file the appeal 
in writing with the Board's Ombudsman within 30 calendar days of the 
date of the relevant written material supervisory determination, 
with a copy to the Officer in Charge of Supervision at the 
appropriate Reserve Bank. The appeal must include a clear and 
complete statement of all relevant facts and issues, as well as all 
arguments that the institution wishes to present, and must include 
all relevant and material documents that the institution wishes to 
be considered.
    (3) Distribution of Appeal. After receipt of a request for an 
appeal, the Board's Ombudsman shall promptly notify the director of 
the appropriate division of the Board and the Board's General 
Counsel of the appeal.
    (4) Initial Review Panel. Within ten calendar days of receipt of 
a timely appeal, the director of the appropriate division of the 
Board or an officer designated by the appropriate division director 
must appoint three Reserve Bank employees to form an initial review 
panel to consider the appeal and an attorney to advise the initial 
review panel in the exercise of its responsibilities. The members of 
the initial review panel and the appointed attorney must not have 
been substantively involved in any matter at issue; must not 
directly or indirectly report to any person(s) who made the material 
supervisory determination under review; must not be employed by the 
Reserve Bank that made the material supervisory determination under 
review; and must have relevant experience to contribute to the 
review of the material supervisory determination. An individual 
shall be considered to have been substantively involved in a 
material supervisory determination if the individual was personally 
consulted regarding the issue being determined and provided guidance 
regarding how it should be resolved. The initial review panel shall 
determine all procedural issues that are governed by the appeals 
guidelines.
    (5) Initial Review Meeting. The initial review panel may, in its 
discretion, conduct an informal appeal meeting. If the panel decides 
to conduct such a meeting it shall notify the institution in writing 
of the date, time and place of the meeting, to be set no later than 
21 calendar days after the date the appeal is received. The 
institution may appear at the appeal meeting personally or through 
counsel to make an oral presentation to the panel. Panel members may 
ask questions of any person participating in the meeting. The 
institution and the Reserve Bank may not cross examine persons 
participating in the meeting. A verbatim transcript of the meeting 
may be taken if the institution requests a transcript and agrees to 
pay all expenses, and if the initial review panel determines that a 
transcript would assist the panel in carrying out its 
responsibilities. The meeting provided under these guidelines is not 
governed by formal rules of evidence. No formal discovery is 
required or permitted. The initial review panel may make any rulings 
reasonably necessary to facilitate the effective and efficient 
operation of the meeting.
    (6) Record. The record of the appeal shall at a minimum include 
the original decision being appealed, the materials submitted by the 
institution in connection with the appeal and the materials 
identified by Federal Reserve staff as relevant to the material 
supervisory determination being appealed, including workpapers. The 
initial review panel may, in its discretion, supplement the record 
in the manner described below. The entire record of the appeal, 
including the decision of the initial review panel and any meeting 
transcripts or material(s) submitted in connection with any 
subsequent final review, shall be considered confidential 
supervisory information of the Board.
    (7) Standard of Review Applied by Initial Review Panel. The 
initial review panel shall conduct a review of the material 
supervisory determination on appeal. The panel must consider whether 
the Reserve Bank's material supervisory determination is consistent 
with the Board's policies, consistent with applicable laws and 
regulations, and supported by the record. In doing so, the panel 
shall make its own supervisory determination and shall not defer to 
the judgment of the Reserve Bank staff that made the material 
supervisory determination though it may rely on any examination 
workpapers developed by the Reserve Bank or materials submitted by 
the institution if it determines it is reasonable to do so. The 
panel may supplement the record described above by soliciting the 
views of outside parties, including staff from the Board, the 
Reserve Banks, and other supervisory agencies (for example, in cases 
of joint examinations or inspections), including the Federal Reserve 
staff who participated in making the material supervisory 
determination being appealed, prior to issuing a decision. The panel 
may, in its discretion, conduct additional fact-finding.
    (8) Notice of Decision. Within 45 calendar days after the date 
the appeal is received, the initial review panel shall provide 
written notice of its decision to the board of directors of the 
institution. The notice of decision shall contain a statement of the 
basis for the initial review panel's decision to continue, 
terminate, or otherwise modify the material supervisory 
determination(s) at issue or to remand consideration of the material 
supervisory determination at issue to the examiners that made the 
determination to allow them to consider additional evidence 
presented in connection with the appeal. The notice of decision 
shall also indicate that the institution may request a final review 
as set forth in this subpart by filing a written request with the 
Ombudsman of the Board. The initial review panel may extend the 
period for issuing a decision by up to 30 calendar days if the panel 
determines that the record is incomplete and additional fact-finding 
is necessary for the panel to issue a decision.
    (9) Ombudsman Participation. The Ombudsman may attend, as an 
observer, hearings or deliberations relating to the appeal. The 
Ombudsman will not have substantive involvement in or act as a 
decision-maker with respect to the appeal.
    (10) Use of Confidential Supervisory Information. If the Reserve 
Bank or the Board have confidential supervisory information from 
another regulated institution that is pertinent to the appeal, they 
may elect to use that information, provided that the information is 
entered into the record for the appeal and provided to the appealing 
institution, subject to limitations on disclosure, including those 
imposed by the Board's applicable regulations,\1\ and redaction of 
all information not relevant to the appeal.
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    \1\ See 12 CFR 261.20.
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    (11) Request for Final Review. Within 14 calendar days after 
notice of decision by the initial review panel, the institution, 
with the consent of its board of directors, or in the case of a U.S. 
agency or branch of a foreign bank, the senior management person(s) 
responsible for the bank's U.S. operations, may appeal that decision 
to a final review panel by filing a written request for final review 
with the Ombudsman. The request for final review must state all the 
reasons, legal and factual, the institution disagrees with the 
initial review panel's decision.
    (12) Waiver of Final Review. Failure to timely request final 
review in a manner consistent with these guidelines shall constitute 
a waiver of the opportunity for final review, and the decision of 
the initial review panel shall constitute a final and unappealable 
material supervisory determination.
    (13) Distribution of Final Review Request. After receipt of a 
request for final review, the Board's Ombudsman shall promptly 
notify the director of the appropriate division of the Board and the 
Board's General Counsel of the request for final review.
    (14) Final Review Panel. When an institution files a request for 
final review, the director of the appropriate division of the Board 
shall promptly appoint three individuals to form a final review 
panel to permit completion of the appeal within the applicable 
period. The final review panel

[[Page 8394]]

shall include at least two Board employees, at least one of whom 
must be an officer of the Board at the level of associate director 
or higher. The Board's General Counsel shall appoint an attorney to 
advise the final review panel in the exercise of its 
responsibilities. The members of the final review panel and the 
appointed attorney must not be employed by the Reserve Bank that 
made the material supervisory determination under review; must not 
have been members of the initial review panel; and must not have 
been personally consulted regarding the issue being determined and 
provided guidance regarding how it should be resolved, or directly 
or indirectly report to the person(s) who made the material 
supervisory determination under review. The final review panel shall 
determine all procedural issues regarding the final review.
    (15) Final Review Meeting. The final review panel may determine 
in its discretion to have an informal appeal meeting at which a 
representative of the institution or counsel may appear personally 
to make an oral presentation to the panel. No facts may be 
introduced in this meeting that are not contained in the record upon 
which the initial review panel made its decision. In the event the 
panel decides to have a meeting with the appealing institution, 
panel members may ask questions of any person participating in the 
meeting. The institution may not cross examine persons participating 
in the meeting. A verbatim transcript of the meeting may be taken at 
the cost of the Board if the final review panel determines that a 
transcript would assist the panel in carrying out its 
responsibilities. The meeting provided under these guidelines is not 
governed by formal rules of evidence. No formal discovery is 
required or permitted. The final review panel may make any 
procedural rulings reasonably necessary to facilitate the effective 
and efficient operation of the meeting.
    (16) Scope of Final Review. The scope of the final review shall 
be confined to the record upon which the initial review panel made 
its decision.
    (17) Standard of Review of Final Review. The final review panel 
shall determine whether the decision of the initial review panel is 
reasonable. In reaching this determination, the panel should 
consider, among other things, whether the decision was based on a 
consideration of the relevant factors, whether there has been a 
clear error of judgment, and whether the decision is supported by a 
preponderance of the evidence. The final review panel may affirm the 
decision of the initial review panel even if it is possible to draw 
a contrary conclusion from the record presented on appeal.
    (18) Final Review Decision. Within 21 calendar days of the 
filing of a request for final review, the director of the 
appropriate division of the Board shall provide written notice of 
the decision of the final review panel to the board of directors of 
the institution. The final review panel may continue, terminate, or 
otherwise modify the material supervisory determination(s) at issue 
or remand consideration of the material supervisory determination at 
issue to the examiners that made the determination to allow them to 
consider additional evidence presented in connection with the 
appeal. A copy of the decision will be provided to the director of 
the appropriate division of the Board and the Officer in Charge of 
Supervision at the appropriate Reserve Bank. A copy of the decision 
will be published as soon as practicable, and the published decision 
will be redacted to avoid disclosure of exempt information. In cases 
in which redaction is deemed insufficient to prevent improper 
disclosure, the published decision may be presented in summary form.

C. Expedited Procedures for Appealing a Material Supervisory 
Determination

    When a material supervisory determination relates to or causes 
an institution to become critically undercapitalized, the review of 
any appeal of that supervisory determination will be processed on an 
expedited basis.
    Notwithstanding any other provision in these guidelines, a 
matter processed under expedited review will be subject to the same 
policies that govern all appeals except that the initial review 
panel will issue a decision within 35 calendar days following the 
date the appeal is received (such period may be extended by up to an 
additional 7 calendar days if the initial review panel decides that 
such time is required to supplement the record and to consider any 
additional information received), the institution shall have 7 days 
to file an appeal of the initial review panel's decision, and the 
final review panel will issue a decision within 10 calendar days.

D. Effect of Appeal on Material Supervisory Determinations

    A material supervisory determination shall remain in effect 
while under appeal and until such time as it is modified or 
overturned through the appeals process. An appeal does not prevent 
or suspend the Federal Reserve or any other appropriate agency from 
taking any supervisory or enforcement action-either formal or 
informal-it deems appropriate to discharge the agency's supervisory 
responsibilities. In such cases, the rights of appeal provided for 
in the statutes and regulations concerning those actions shall 
govern.
    In addition, an appeal does not prevent or suspend the operation 
of the PCA framework under section 38 of the Federal Deposit 
Insurance Act, prevent or suspend an appropriate authority from 
appointing a receiver for the institution or otherwise causing the 
closure of an institution, or prevent or suspend an appropriate 
authority from taking any other action under the PCA framework. If 
the institution is placed into receivership while an appeal is 
outstanding, the appeal will be considered moot and will not be 
completed.

E. Safeguards Against Retaliation

    Neither the Federal Reserve nor any employee of the Federal 
Reserve may retaliate against an institution or person based on the 
filing or outcome of an appeal under this guidance. In accordance 
with longstanding Federal Reserve practice, the appeals framework is 
intended to foster an environment where concerns and issues may be 
freely and openly discussed.
    Each Reserve Bank shall provide institutions with notice of the 
Board's anti-retaliation policy in connection with each Federal 
Reserve led examination.
    An institution that believes that it has suffered retaliation or 
any other form of unfair treatment is encouraged to contact the 
appropriate Reserve Bank, and may file a claim of retaliation with 
the Board's Ombudsman. The Ombudsman may attempt to resolve a claim 
of retaliation informally by engaging in discussions with the 
concerned institution and the appropriate Board or Reserve Bank 
staff.
    Nothing in this guidance is intended to prevent the Ombudsman 
from initiating a factual inquiry into alleged retaliation at any 
time. The Ombudsman may initiate a factual inquiry into a claim of 
retaliation, at any time, by providing notice to the appropriate 
Board division director(s) and the appropriate Reserve Bank officer 
in charge of supervision. As part of the inquiry, the Ombudsman may 
collect and review documents, interview witnesses, and consult Board 
and Reserve Bank staff with subject matter expertise. The Ombudsman 
also may request that the appropriate division director authorize or 
assign such additional resources as necessary to assist the 
Ombudsman in fully reviewing the matter.
    Upon the completion of a factual inquiry into a claim of 
retaliation, if the Ombudsman concludes that retaliation has 
occurred, the Ombudsman will forward the claim of retaliation, along 
with the Ombudsman's factual findings to the appropriate division 
director(s) of the Board. These officials will take appropriate 
action to resolve the matter. In addition, to prevent future 
retaliation for an appeal, the Ombudsman may recommend to the 
appropriate division director(s) that the next examination of the 
institution or review that may lead to a material supervisory 
determination exclude personnel involved in the claim of 
retaliation. The division director(s) will make the final decision 
as to whether any examination staff should be excluded.
    The Board's Ombudsman will contact institutions within six 
months after a material supervisory determination appeal has been 
decided to inquire whether retaliation has occurred.

F. Availability of Procedures

    The Federal Reserve, through the Board and Reserve Banks, shall 
make these guidelines readily available on its public website and to 
any member of the public who requests them.

Exhibit B

Ombudsman for the Federal Reserve System

Policy Statement

    Section 309 of the Riegle Community Development and Regulatory 
Improvement Act of 1994, 12 U.S.C. 4806, requires each of the 
federal banking agencies to appoint an Ombudsman. Section 309 
provides that the Ombudsman:
    (1) is to act as a liaison between the agency and any affected 
person with respect to any problem such party may have in dealing 
with the agency resulting from the regulatory activities of the 
agency; and

[[Page 8395]]

    (2) is to ensure that safeguards exist to encourage complainants 
to come forward and preserve confidentiality.
    Mission of the Ombudsman. The Ombudsman is charged with 
performing three major functions: (1) serving as a facilitator and 
moderator for the fair and timely resolution of complaints related 
to the Federal Reserve System's regulatory activities; (2) reporting 
to the Board on issues that are likely to have a significant impact 
on the Federal Reserve System's missions, activities, or reputation 
that arise from the Ombudsman's review of complaints, such as 
patterns of issues that occur in multiple complaints; (3) receiving, 
reviewing, and deciding claims of retaliatory conduct by Federal 
Reserve System staff. The Ombudsman also serves as the initial 
recipient for an appeal of a material supervisory determination and 
plays a role in resolving appeals of some consumer complaints. In 
addition, the Ombudsman ensures that safeguards exist to encourage 
complainants to come forward and to protect confidentiality.
    Serving as a Complaint Facilitator. The Ombudsman assists 
institutions with issues and questions related to Reserve Bank or 
Board regulatory activities. In doing so, the Ombudsman shall 
operate independently of the supervisory process to the extent 
necessary to ensure that appropriate safeguards exist to encourage 
complainants to come forward and preserve confidentiality.
    In situations where the Board has not established a process for 
addressing a certain type of question or complaint, the Ombudsman is 
available to facilitate the resolution of the question or complaint. 
Although the Ombudsman does not have decision-making authority 
regarding any substantive matters, including supervisory 
determinations and regulatory action (other than for retaliation 
claims), the Ombudsman is available to assist institutions, and 
particularly community banks, in locating the correct System staff 
person to address or resolve such a question or complaint and may 
coordinate meetings and facilitate discussions between the 
institution and System staff, including senior officials, as 
necessary. In order to facilitate this process, the Ombudsman may 
investigate the situation in order to identify the relevant facts 
and circumstances. The Ombudsman may also participate in meetings or 
discussions related to the matter if requested by either the 
institution or System staff, and may require updates from System 
staff, as appropriate, until the matter is resolved. If the 
Ombudsman believes such a complaint has not been satisfactorily 
addressed, the Ombudsman may raise the matter with the appropriate 
Division Director or Board committee, as appropriate.
    When an issue is brought to the attention of the Ombudsman for 
which the Board's rules or procedures provide an avenue of appeal or 
another appropriate forum for resolution, the Ombudsman will explain 
the process to the complaining party, and direct the party to the 
appropriate appeals process or forum for the complaint.\1\ In 
addition, the Ombudsman is also available to facilitate informal 
discussions between a potential appellant and the appropriate 
Reserve Bank or Board staff in order to explore solutions before an 
appeal is filed. Such discussions do not stay or otherwise alter any 
of the deadlines under the Board's rules or procedures.
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    \1\ The Board's rules provide existing mechanisms for 
resolutions of complaints in many instances, such as: material 
supervisory determinations pursuant to section 309(a) of the Act; 
review of actions delegated to the Reserve Banks or Board staff 
pursuant to 12 CFR part 265; prompt corrective action directives 
under section 38 of the Federal Deposit Insurance Act; denials or 
partial denials of Freedom of Information or Privacy Act requests; 
issuance of capital directives pursuant to 12 CFR 263.80-263.85; 
decisions with respect to applications; and matters within the 
jurisdiction of the Board's Inspector General or Federal or State 
investigatory or prosecutorial authorities.
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    The Ombudsman will serve as the initial recipient for an appeal 
of a material supervisory determination and may attend, as an 
observer, hearings or deliberations relating to the appeal if 
requested by either the institution or System personnel. In any 
event, the Ombudsman will not have any substantive involvement in or 
act as a decision-maker with respect to the appeal.
    Providing Feedback on Patterns of Issues. The Ombudsman is in a 
unique position to identify and report patterns of issues arising 
from complaints related to Reserve Bank or Board regulatory 
activities. The Ombudsman will track inquiries and complaints based 
on relevant characteristics, such as geographic location, scope, 
policy implications, and final disposition, to help identify any 
such trends, including trends that implicate differently sized 
institutions disproportionately. This tracking will be conducted in 
a manner designed to preserve confidentiality of the complainant to 
the maximum extent possible. As appropriate, the Ombudsman will 
report findings of patterns of issues to the appropriate Board 
committee or division director and Reserve Bank or Board staff. The 
Ombudsman will also report any issue stemming from a complaint that 
is likely to have a significant impact on the Federal Reserve 
System's mission, activities, or reputation.
    Retaliation Claims by Supervised Persons. The Federal Reserve 
Board does not tolerate retaliation by System staff against a 
supervised institution or its employees (``supervised persons''). 
Retaliation is defined as any action or decision by Reserve Bank or 
Board staff that causes a supervised person to be treated 
differently or more harshly than other similarly situated 
institutions because the supervised person attempted to resolve a 
complaint by filing an appeal of a material supervisory 
determination or utilized any other Board mechanisms for resolving 
complaints. Retaliation includes, but is not limited to, delaying or 
denying action that might benefit a supervised person without a 
sound supervisory reason or subjecting a supervised institution to 
heightened examination standards without a sound supervisory reason.
    The Ombudsman is authorized to receive, review, and determine 
the merits of complaints of retaliatory conduct by Reserve Bank or 
Board staff. The Ombudsman may attempt to resolve retaliation claims 
informally by engaging in discussions with the concerned supervised 
person and the appropriate Board or Reserve Bank staff. If a 
complaint cannot be resolved informally, the Ombudsman may initiate 
a full investigation into the underlying facts and circumstances.
    To commence a factual investigation of a complaint of 
retaliatory conduct, the Ombudsman should provide written notice to 
the appropriate Board committee and division director and the 
appropriate Reserve Bank officer in charge of supervision. As part 
of the investigation, the Ombudsman may, among other things, collect 
and review documents, interview witnesses, and seek any other 
relevant information. The Ombudsman may also consult Board and 
Reserve Bank staff with subject matter expertise. Where necessary, 
the appropriate Board committee or division director may authorize 
or assign such additional resources as may be needed to assist the 
Ombudsman in fully reviewing the matter.
    Upon completion of the factual investigation of a complaint of 
retaliatory conduct, the Ombudsman will decide whether a member of 
System staff retaliated, as defined above. The Ombudsman will report 
this determination to the appropriate Board committee or Governor 
and division director and the appropriate Reserve Bank officer in 
charge of supervision and may make recommendations for resolution of 
the matter to those parties. However, the Ombudsman shall not make 
recommendations regarding disciplinary action against a System staff 
member. The Ombudsman's determination regarding retaliation will be 
communicated in writing to the supervised person.
    To further ensure that supervised persons are not subjected to 
retaliation, as defined above, the Ombudsman will contact a 
supervised institution within six months after an appeal has been 
decided to inquire whether retaliation occurred. Where possible, the 
Ombudsman will also contact the institution after the next 
examination following an appeal. In the event an institution 
complains of retaliation, the Ombudsman will initiate the process 
outlined above to informally review the matter or initiate a factual 
investigation.
    Consumer Complaints and Appeals. Independent of the Ombudsman 
function, the Federal Reserve System operates a consumer complaint 
and inquiry program to assist members of the public who are 
experiencing problems with their financial institution. In 
accordance with this program, the Ombudsman will refer all consumer 
complaints to the Division of Consumer and Community Affairs (DCCA). 
DCCA will review the complaint to determine appropriate handling. If 
a new complaint is received, DCCA will refer the complaint to the 
Federal Reserve Consumer Help Center (FRCH) for processing. If the 
complainant requested an independent review of a previously filed 
complaint, the Ombudsman will refer the complaint to DCCA, who will 
perform the review and respond to the complainant. The Ombudsman 
will consult with DCCA during the appeal investigation, and in some 
instances, suggest additional

[[Page 8396]]

actions, including further investigations that should be taken to 
ensure that the matter is fully and fairly addressed. When 
responding to the complainant, DCCA will also provide a final copy 
of the response letter to the Ombudsman.
    If the Ombudsman receives a complaint regarding DCCA's review of 
an appeal, the Ombudsman will collect and review the complaint 
documents and seek any other relevant information. The Ombudsman may 
also consult Board and Reserve Bank staff to discuss the details of 
the previous complaint investigations. The Ombudsman is responsible 
for responding to the complainant with its determination. As 
appropriate, the Ombudsman will contact the appropriate Board 
division director and Reserve Bank staff with feedback or concerns.
    Safeguards. These policies, processes, and practices are 
intended as safeguards to encourage complainants to come forward 
with issues or complaints related to the Federal Reserve System's 
regulatory activities.
    To the extent possible, the Ombudsman will honor requests to 
keep confidential the identity of a complaining party. It must be 
recognized, however, that it may not be possible for the Ombudsman 
to resolve certain complaints, including complaints of retaliation, 
if the Ombudsman cannot disclose the identity of the complaining 
party to other members of Federal Reserve staff.
    Procedures. A party may contact the Ombudsman at any time 
regarding concerns or issues resulting from the regulatory 
activities of the Board or the Reserve Banks by calling 1[dash]800-
337-0429, by sending a fax to 202-530-6208, by writing to the Office 
of the Ombudsman, Board of Governors of the Federal Reserve System, 
Washington, D.C. 20551, or by sending an email to [email protected].

[FR Doc. 2018-03907 Filed 2-26-18; 8:45 am]
 BILLING CODE 6210-01-P