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The Role of Supervisory Guidance

Gavin T. Ales
Oct 26, 2018
It’s a case that seems all too reminiscent of the abuses that were commonplace in the days before the 2008 crash

In a joint statement released on Sept. 11, 2018, five federal agencies—the Federal Reserve Board, the Bureau of Consumer Financial Protection, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency (the “Agencies”)—clarified the role of supervisory guidance. The statement articulates that “supervisory guidance outlines the agencies’ supervisory expectations or priorities and articulates the agencies’ general views regarding appropriate practices for a given subject area,” but that such guidance “does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance.”
 
Supervisory guidance plays an important role in ensuring a consistent approach by the industry to common problems. This guidance comes in many forms, including bulletins, policy statements, quick reference guides, and FAQs.  This information is often released to provide consumers and business with examples of practices the various Agencies consider to be the standard, or at very least, exemplary of the requirements of applicable laws and regulations. The agencies clarify in the statement that supervised institutions will not be cited for not strictly adhering to these practices, but that supervisory guidance may be referenced in examinations, including in examination reports, as examples in addressing correction of violations of laws or regulations or where unsafe or unsound practices are observed.
 
The statement clarifies the agencies’ positions on various policy areas, including the following:
 
►The agencies intend to limit the use of numerical thresholds or other “bright-lines” in describing expectations in supervisory guidance.
►Examiners will not criticize a supervised financial institution for a “violation” of supervisory guidance. Rather, any citations will be for violations of law, regulation, or non-compliance with enforcement orders or other enforceable conditions.
►The agencies also have at times sought, and may continue to seek, public comment on supervisory guidance.
►The agencies will aim to reduce the issuance of multiple supervisory guidance documents on the same topic and will generally limit such multiple issuances going forward.
►The agencies will continue efforts to make the role of supervisory guidance clear in their communications to examiners and to supervised financial institutions, and encourage supervised institutions with questions about this statement or any applicable supervisory guidance to discuss the questions with their appropriate agency contact.
 
The statement reinforces the role supervisory guidance plays in helping an industry comply with complex laws and regulations. Supervisory guidance helps to complete gaps that may exist in individual statutes or regulations and also helps industry members understand how laws and regulations work together.
 Gavin T. Ales is Chief Compliance Officer with Torrance, Calif.-based DocMagic Inc.Gavin T. Ales is Chief Compliance Officer with Torrance, Calif.-based DocMagic Inc. He may be reached by phone at (800) 649-1362, ext. 6446 or e-mail [email protected].

This article originally appeared in the October 2018 print edition of National Mortgage Professional Magazine.

 
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