Examination fairness bill would improve transparency, consistency

Bipartisan examination fairness legislation is a strong step in the right direction toward ensuring federal financial regulators conduct fair exams for those they supervise, America’s Credit Unions President/CEO Jim Nussle wrote Tuesday. The Fair Audits and Inspections for Regulators’ (FAIR) Exams Act (H.R. 8071) was introduced by Reps. French Hill, R-Ark., and David Scott, D-Ga.

“Your legislation will facilitate transparency and improve consistency in the examination process; provide a resource for financial institutions to express concern about their examination experience; and establish an independent adjudicatory process for the appeal of material supervisory determinations,” wrote Nussle. “We strongly support this legislation and look forward to working with you to ensure its timely enactment.”

Specifically, the bill would:

  • Authorize financial institutions to seek a prompt, independent review of a “Material Supervisory Determination” (MSDs) from a regulatory examination – and can further be appealed to the U.S. Court of Appeals;
  • Require federal financial regulators to conduct and complete examinations in a timely fashion and provide a final exam report no later than 60 days after the exit interview or the provision of additional exam material;
  • Require the regulator to share with financial institutions the materials relied on in making the MSD after the exam exit interview;
  • Create a new Office of Independent Examination Review to adjudicate MSD appeals to be led by an FFIEC-appointed independent director who would report annually to Congress on the actions taken under this bill; and
  • Prohibit federal financial regulators from retaliating against financial institutions for exercising their appellate rights under this bill.

America’s Credit Unions requested one change regarding the new Office of Independent Examination Review, noting a “proportional split of the costs based on the amount of assets under supervision by each regulator” would be a reasonable alternative to the evenly distributed costs in the legislation.

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