The Bank Policy Institute (BPI) and the American Association of Bank Directors (AABD) have expressed support for proposed changes by the Federal Deposit Insurance Corporation (FDIC) to its supervisory appeals process. In a joint comment letter, the organizations said these reforms would improve due process and impartiality in a system they believe requires significant changes.
“The FDIC’s proposed changes will help restore due process and confidence to the supervisory appeals framework,” the associations stated after filing the letter. “Justice isn’t served when the accuser is also the judge and the jury. Supervisory actions often carry significant consequences and affect banks’ ability to support their communities, so it is imperative that these decisions are justified and backed by an impartial review.”
The context for this proposal dates back to 2022, when the FDIC replaced its independent Office of Supervisory Appeals with a Supervision Appeals Review Committee (SARC). This change was made without public notice or comment, raising concerns about transparency and introducing potential conflicts of interest in how examination appeals are handled. Officials on SARC could have been involved with or overseen teams issuing directives under appeal, which heightened worries about fairness.
Examiners make complex judgments on issues such as loan quality and management capability. The associations argue that mistakes can have serious effects on banks, yet current rules often prevent banks from challenging supervisory determinations because these matters are considered confidential. Banks may not be able to access all facts or reasoning behind examiners’ decisions, limiting their ability to respond effectively.
Under the FDIC’s new proposal, an independent office would serve as the final authority for bank appeals of examiner actions—including significant decisions like CAMELS rating downgrades. The office would be staffed by outside experts who are not part of FDIC leadership or supervisory staff and would be subject to conflict-of-interest rules. This structure aims to strengthen independence in reviewing appeals.
“No defendant in a lawsuit would be comfortable presenting their case before a court system that only allowed judges drawn from the ranks of plaintiff’s lawyers and prosecutors. … Similarly, a supervisory review board drawing from a diverse range of career backgrounds will increase the independence of the panel and bolster trust in the appeals system.”
Supporters say these reforms would improve due process, accountability, and fairness in bank supervision while better aligning with Congressional intent.
The BPI and AABD also suggested technical adjustments: allowing banks to seek review before enforcement actions based on disputed facts; permitting temporary pauses on enforcement during an appeal; letting banks submit all available evidence; and expanding what types of supervisory determinations can be appealed.
BPI has called for broader reforms in bank supervision policy beyond this proposal. More information is available at BetterBankSupervision.com.
The Bank Policy Institute represents universal banks, regional banks, and major foreign banks operating in the United States. It conducts research on regulatory issues, analyzes proposed regulations, and advocates for industry interests regarding cybersecurity, fraud prevention, and information security.
Founded during the savings-and-loan crisis in 1989, AABD serves individual directors of banks by providing information, education, and advocacy resources tailored specifically for board members rather than institutions themselves.