OCC proposes new appeal process for banks, trusts

• Key insight: The Office of the Comptroller of the Currency’s proposed rule would let banks and trusts under its jurisdiction appeal supervisory findings with a “fresh look” standard.
• Supporting data: The OCC said that of the 12 supervisory appeals it received regarding fair lending issues between 2017 and 2024, the agency sided with examiners in all of those cases.
• Forward look: The agency will take comment on the proposal for 60 days from Tuesday, concluding on April 18. 

The Office of the Comptroller of the Currency Tuesday proposed establishing an appeals board to review challenges by banks and trusts to supervisory decisions with a new “fresh look” standard, aiming to fix a system supervised entities feel is stacked against them. 

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In addition to an appeals board to hear bank appeals, the OCC proposal would expand the role of the Ombudsman as a neutral party assisting banks in airing their grievances, establish a de novo standard of review for appeals, and raise protections around agency retaliation. Under the proposal, supervised entities eligible for appeals would include uninsured institutions like national trust banks, foreign bank branches and, “certain institution-affiliated parties.”

“The proposed changes reflect the OCC’s experience administering the bank appeals process and are intended to enhance the independence and efficiency of the appeals function,” the agency argued in a release. “OCC is proposing this broad definition [of supervised entities] because it believes that uninsured institutions, including uninsured national trust banks, should also have a meaningful opportunity to appeal OCC determinations, and the OCC seeks to enhance the accessibility of its appeals process to those affected by OCC material supervisory determinations.”

The proposed appeals board would consist of the agency’s chief national bank examiner alongside two term appointees, but the agency says it is open to input from stakeholders on the board structure. Currently, OCC employees would not be eligible to serve as term appointees, but the agency is considering allowing employees not involved with the underlying supervisory determination in question to participate.

“The Appeals Board could also include the Ombudsman or the Chief Counsel,” the proposal noted. “The term appointees, if that option is selected, would be individuals with relevant supervisory experience gained either from working with a financial regulator or from working for a financial institution, law firm, consulting firm, trade group, or other similar organization.”

In reviewing supervisory decisions, the agency is proposing the body apply a “de novo” standard of review, meaning the board would review challenges with a “fresh look” rather than deferring to expertise of examiners when undergoing the dispute review. 

Comptroller of the Currency Jonathan Gould has been a vocal critic of the bank supervisory process, saying in a speech in November that bank supervision “needs to be put on a firmer legal foundation.”

The agency noted that the Federal Deposit Insurance Corp. and Federal Reserve Board already have similar standards to those laid out in the proposal, but the OCC’s rules allow examiners to generally defer to examiner findings when conducting the reviews. The OCC says this general practice has led to a perception that the agency will generally not challenge examiner findings. In the 12 appeals of fair lending referrals OCC reviewed from 2017 to 2024, the agency sided with examiners in every instance, according to the bank regulator.

“This lack of a clear standard, coupled with the fact that the OCC appeals process finds in favor of the supervisory office the majority of the time, has led to a perception that filing a formal appeal is not worth the resources and risk of retaliation because there is a low chance of success,” the OCC stated. “This is especially true in regard to certain types of challenges, such as those regarding referrals to the Department of Housing and Urban Development and the Department of Justice of potential fair lending violations.” 

Under the proposal, firms could bring their disputes directly to a Deputy Comptroller, who would be required to produce a written decision in 45 days or less. Enforcement actions would not be subject to appeal, but the findings underpinning enforcement actions would be subject to the new standard. The proposal, published Tuesday in the Federal Register, will be available for comment for 60 days.