Federal Financial Regulatory Agencies Propose Rule to Codify Supervisory Guidance Affirming the Non-Binding Role of Supervisory Guidance

On October 20, the Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Federal Reserve), Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration, and CFPB (Agencies) issued a notice of proposed rulemaking for a rule intended to confirm that the Agencies will follow and respect the limits of administrative law in carrying out their supervisory responsibilities by affirming that supervisory guidance does not create binding legal obligations for the public, including for supervised institutions. As standard practice, the Agencies issue supervisory guidance in numerous forms about a variety of matters within their purview, such as to clarify or express views or expectations about matters affecting the institutions they supervise. Such supervisory guidance often appears as interagency statements, advisories, bulletins, policy statements, questions and answers, and frequently asked questions. Unlike laws or regulations, supervisory guidance does not undergo formal legislative or administrative rulemaking processes, and it does not have the force of law. Nonetheless, supervised institutions often perceive that Agency examiners enforce supervisory guidance as if it were a law or regulation. In 2018, the Agencies issued a joint statement affirming these basic tenets of administrative law, such that enforcement action should not be taken against a supervised institution on the basis of a violation of or noncompliance with supervisory guidance. Of course, the 2018 statement was itself supervisory guidance. The proposed rule, which includes a revised version of the joint statement, would clarify and codify the principles set forth in 2018’s “guidance on guidance.” Comments on the proposed rule must be received 60 days from publication in the Federal Register.