Sen. Moran Introduces Legislation to Increase Transparency in Bank Exams

WASHINGTON - U.S. Senators Jerry Moran (R-Kan.) and Bill Hagerty (R-Tenn.) this week introduced the Fair Audits and Inspections for Regulators' (FAIR) Exams Act to help create a fair appeals process for banks and increase transparency for the bank examination process.

The legislation would bring greater accountability to bank and credit union examinations by establishing statutory timelines for examinations and examination reports, creating a prudential private letter ruling and creating a robust appeals process if there is a legitimate disagreement between a regulator and the institutions they oversee. In addition, the FAIR Exams Act would provide small lenders with more clarity and representation, allowing them to continue serving their communities efficiently by receiving results faster and more transparently.

"A fair and effective supervisory examination process for financial institutions is critical to maintaining a healthy and transparent financial system," said Sen. Moran. "This legislation would bring much-needed transparency to the examination process to help make certain all banks, particularly community banks in rural communities, are treated fairly and have access to a rigorous appeals process free from bias."

Specifically, the FAIR Exams Act would:

• Require the appropriate regulatory agencies to issue timely responses to banks and credit unions during the examinations process;
• Establish a prudential private letter ruling process allowing financial institutions to obtain binding written guidance from regulators on proposed activities and regulatory interpretations;
• Create a three-person Independent Examination Review Board within the Federal Financial Institutions Examination Council (FFIEC) to address examination complaints and procedures;
• Require the appropriate federal financial institutions regulatory agency, upon request, to provide the examination and factual information relied upon in support of a material supervisory determination; and
• Provide financial institutions with the right to an independent appeal of material supervisory determinations, including a de novo review by the Board, with binding decisions and protections against regulatory retaliation.

"ICBA and the nation's community banks applaud Sen. Moran for his newly introduced legislation to provide due process for banks appealing supervisory decisions, which will promote trust and accountability in supervisory appeals," said Rebeca Romero Rainey, President and CEO, Independent Community Bankers of America. "By establishing an Office of Independent Examination Review within the FFIEC to review material supervisory determinations, the FAIR Exams Act will help ensure checks and balances within the supervisory bank examination process in support of a healthy and transparent financial system."

"We commend Sen. Moran and his cosponsors for introducing the FAIR Exams Act, which would improve transparency in the examination process and increase accountability for examiners," said Rob Nichols, President and CEO, American Bankers Association. "This important legislation will make the examination process fairer and ultimately contribute to a stronger financial system."

"The US Chamber of Commerce supports the Fair Audits and Inspections for Regulators' Exams Act and applauds Senator Moran for reintroducing this critical legislation which has already passed the House of Representatives, said Mike Flood, Senior Vice President of Center for Capital Markets Competitiveness, U.S. Chamber of Commerce. "This bill would establish an even-handed supervisory process to enhance accountability in bank examinations and would require examination reports to be issued in a more timely manner and establish an independent review and appeal process to mediate differences between banks and their regulators."

"CBA applauds Senator Moran for introducing the Senate companion to the FAIR Exams Act, commonsense legislation that would bring greater transparency, accountability, and consistency to the bank examination process," said Lindsey Johnson, President and CEO, Consumer Bankers Association. "Establishing an independent review mechanism and reasonable timelines for examination findings will give financial institutions greater confidence that supervisory decisions are fair, timely, and impartial. We thank Senator Moran for his leadership and urge Congress to advance this important bipartisan, bicameral reform."

The FAIR Exams Act is also supported by America's Credit Unions.

Full text of the legislation can be found HERE.

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