FDIC Logo by U.S. Government is licensed under Public Domain

On July 6, 2022, American Banker’s BankThink platform published an op-ed by ATR Federal Affairs Manager Bryan Bashur. The op-ed discusses the Federal Deposit Insurance Corporation’s decision to scrap an independent appellate board made up of former government employees and revert to a committee composed of a member of the FDIC’s board and two current staff members.

The piece begins by describing how the FDIC had recently been removing conflicts of interest and improving independence as recently as December, but suddenly reversed course and reinstated a committee—the Supervision Appeals Review Committee (SARC)—that would be made up of current employees that carry conflicts of interest:

The SARC will be chaired by a current FDIC board member, and its two remaining members will be a deputy or special assistant to FDIC board members, and the FDIC’s general counsel. The FDIC board member who chairs the SARC will not be as independent from political pressure as a former government employee.

The article goes on to give a very possible situation in which the acting FDIC chair appoints Rohit Chopra, the director of the Consumer Financial Protection Bureau:

Director Chopra’s notorious reputation for being “unduly combative” toward the banking industry would make him unfit to perform unbiased reviews of banks’ appeals of supervisory determinations.

The new appellate process could also provide Chopra more leeway to weaponize the Truth in Lending Act and Regulation Z. Since Regulation Z restitution is explicitly mentioned as a “material supervisory determination” that can be appealed to the SARC, Chopra could simultaneously regulate banks from his post at the CFPB and review potential appeals to regulatory supervision of bank compliance with rules and statutes governing credit card fees.

Next, the piece explains that the new process could increase the possibility of bank examiners retaliating against banks who appeal their decisions, causing an adverse chilling effect on appeals. It also explains how politicizing the board in this way would harm banks’ abilities to make acquisitions and engage in mergers.

The op-ed finishes with this:

The FDIC’s decision to reinstate the SARC without stakeholder feedback flies in the face of formal due process that should be afforded to parties affected by the significant change in the appellate process. Instead of moving forward with the SARC, the FDIC should retain the Office of Supervisory Appeals to ensure that reviews will be impartial, independent of pressure from the White House, and void of duplicative regulatory enforcement from the CFPB and bank examiner retaliation.

Click here to read the full op-ed.