OCC 96-18 Subject: National Bank Appeals Process Description: Guidance for Bankers TO: Chief Executive Officers of all National Banks, Federal Branches and Agencies, Department and Division Heads, and all Examining Personnel PURPOSE This issuance consolidates the Office of the Comptroller of the Currency's (OCC) procedures for national banks to appeal agency decisions and actions. This guidance includes matters subject to the National Bank Appeals Process, published as revised in the Federal Register on February 23, 1996, and the Shared National Credit (SNC) Appeals Process. It also introduces a new process for appealing fair lending-related decisions. This issuance, along with the Federal Register document, supersedes Banking Circular 272, "National Bank Appeals Process," issued June 11, 1993, and OCC Bulletin 94-28, "Appeals Procedures for Bankers," dated April 11, 1994. POLICY The OCC is responsible for fostering the safety and soundness of the national banking system and monitoring and enforcing national banks' compliance with laws and regulations. It is also responsible for encouraging competitiveness, integrity, and stability of financial services provided by the national banking system. In fulfilling this mission, the OCC maintains open and ongoing communication with both the institutions it supervises and other affected persons. The agency also fosters the fair and equitable administration of the supervisory process. The OCC ombudsman functions outside the bank supervision area and reports directly to the Comptroller of the Currency. With the prior consent of the Comptroller, the ombudsman may supersede any appealable agency decision or action during the resolution of an appealable matter. The ombudsman also may report weaknesses in OCC policy to the Comptroller, and may make recommendations regarding changes in OCC policy. The establishment of a formal national bank appeals process does not change the core philosophy of the OCC concerning dispute resolution. The agency remains committed to making every effort to resolve disputes arising during the supervisory process fairly and expeditiously, in an amicable, informal manner. National banks and federal branches and agencies of foreign banks (collectively referred to as "national banks" for the purpose of this issuance) are encouraged to contact the ombudsman to discuss any agency policy, decision, or action that might develop into an appealable matter. The ombudsman's objective in these cases is to seek an agreeable resolution to the dispute before it develops into a formal appeal. This avenue provides national banks with an opportunity to resolve issues in the most efficient and expeditious manner possible. If national banks cannot resolve disagreements through informal discussions, they are encouraged to seek a further review of the OCC decisions or actions that are in dispute. In addition, the OCC official involved in the dispute should specifically encourage the national bank to seek such further review. This issuance establishes the process through which a national bank can seek such a review of agency decisions and actions. These procedures also ensure that no one is disadvantaged by filing an appeal. If a national bank questions whether it should make use of this appeal authority, it should contact the ombudsman. In addition, the ombudsman is available to act as a liaison between the OCC and any affected person with respect to any problem such person may have in dealing with the OCC resulting from its regulatory activities. Interested parties should direct all communications with the ombudsman to the following address: Office of the Ombudsman 1000 Louisiana Street, Suite 950 Houston, Texas 77002-5008. Phone - (713) 650-0475, Fax - (713) 650-6248 PROCEDURES Appealable Matters Except as otherwise provided, a national bank may seek a review of any agency decision or action, including a material supervisory determination. Examples of material supervisory determinations include determinations relating to: (1) examination ratings; (2) adequacy of loan loss reserve provisions; and (3) classifications on loans that are significant to an institution. A national bank may not appeal to the ombudsman or its immediate OCC supervisory office: (1) appointments of receivers and conservators; (2) preliminary examination conclusions communicated to the national bank before a final report of examination or other written communication from the OCC is issued (although a national bank is encouraged to discuss any concerns or disagreements regarding these conclusions with its examiner-in- charge or its supervisory office); (3) enforcement-related actions or decisions, including decisions to take prompt corrective action pursuant to Section 38 of the Federal Deposit Insurance Act (12 U.S.C.  1831o); (4) formal and informal rulemakings pursuant to the Administrative Procedure Act, 5 U.S.C. 500 et seq.; and, (5) requests for agency records or information under, and submission of information to the OCC that are governed by, the Freedom of Information Act, 5 U.S.C. 552, or 12 CFR Part 4. An enforcement-related action or decision commences, and therefore becomes unappealable, when the national bank receives notice from the OCC indicating its intention to pursue available remedies under applicable statutes or published enforcement-related policies of the OCC. Such policies include OCC's Policy for Corrective Action (PPM 5310-3)(REV), Civil Money Penalty Policy (PPM 5000-7)(REV), and Securities Enforcement Policy (PPM 5310-5). These policies are available on request from the OCC's Communications Division, 250 E Street, SW, Washington, DC 20219-0001, or by telephone at (202) 874-4700. For purposes of this issuance only, remarks in a report of examination do not constitute notice of intent to pursue enforcement remedies. Filing an Appeal A national bank may seek review of appealable matters by filing an appeal with either the ombudsman or the bank's immediate OCC supervisory office. (In the case of an appealable matter specifically relating to an individual as opposed to a national bank, such as section 914 or Change in Bank Control Act notices, a national bank may file an appeal on behalf of that individual.) Except as otherwise provided in the process for appealing Shared National Credit decisions and fair lending-related matters, all appealable matters can be received in either location. The choice of where to file is left to the discretion of the bank, with a few exceptions. The procedures for filing an appeal under these options are outlined below. o Appeals to the Ombudsman. Formal appeals to the ombudsman may arise from two sources: (1) appeals filed directly with the ombudsman, or (2) second-tier appeals of supervisory office appeal decisions and decisions rendered under one of the appeals procedures designed specifically for the issue in dispute [fair lending-related appeals and Shared National Credit appeals]. Appeals Directly to the Ombudsman: National banks filing appeals with the ombudsman should submit information in writing fully describing the matter in dispute. When the ombudsman receives an appeal, he/she will contact the OCC management official(s) involved in the dispute. That management official(s) will submit written materials and relevant OCC documents pertaining to the appeal within 10 calendar days of the notice from the ombudsman. The ombudsman will contact the bank to ensure that the OCC has all relevant materials. If requested by either the OCC management involved in the dispute or a senior bank official, the ombudsman will arrange a meeting or a telephone call to more fully discuss the appeal and any related issues. In the absence of any extenuating circumstances, the ombudsman will issue a written response to the appeal within 45 calendar days of receipt. Second-Tier Appeals: If a national bank disagrees with the decision rendered through a supervisory office appeal or a decision rendered under one of the specifically designated appeals procedures, the bank may further appeal the matter to the ombudsman. The bank must file written notice of this second-tier appeal within 30 calendar days of receiving the appeal decision letter from the appropriate deputy comptroller or district administrator. When the ombudsman receives the second-tier appeal, he/she shall review any material considered in the preparation of the initial appeal response. The ombudsman will contact the national bank to ensure that the OCC is in possession of all relevant material. If requested by either OCC management involved in the appeal or a senior official of the national bank filing the appeal, the ombudsman will arrange a meeting or a telephone call to more fully discuss the appeal and related issues. In the absence of any extenuating circumstances, the ombudsman will issue a written response to the second-tier appeal within 30 calendar days of the filing of that appeal. Recusal of the Ombudsman: In cases where the ombudsman should be recused from reviewing the decision under appeal, the ombudsman will transfer the appeal to a senior official designated by the Comptroller. o Supervisory Office Appeals. Supervisory office appeals should be filed with the deputy comptroller or district administrator representing the OCC supervisory office that supervises the bank. Community banks and regional banks should file such appeals with the deputy comptroller or district administrator of the OCC district in which the bank is headquartered. Banks in the Multinational Banking and Special Supervision programs using this option should file appeals with the deputy comptroller for the appropriate program in the Washington Office. National banks which choose not to file appeals of corporate decisions directly with the ombudsman should file with the deputy comptroller for Bank Organization and Structure. National banks filing supervisory office appeals should submit information in writing fully describing the matter in dispute and setting forth their bases for requesting an appeal. Upon receipt of an appeal, a supervisory office official will contact the OCC employee(s) involved in the matter under appeal. The supervisory office official includes the appropriate deputy comptroller or district administrator, or a designee who has not directly or indirectly participated in making the decision in dispute. The supervisory office official should also not be directly or indirectly responsible to the agency official who made the decision under review. The OCC employee(s) will submit written or oral information concerning the basis of the appeal. If requested by a senior official of the national bank filing the appeal, the appropriate deputy comptroller or district administrator will arrange a meeting or a telephone call to more fully discuss the appeal and related issues. In the absence of any extenuating circumstances, the appropriate deputy comptroller or district administrator will issue an appeal decision letter within 45 calendar days of the filing of the appeal. Immediately after issuing a decision letter, the deputy comptroller or district administrator will forward to the ombudsman copies of all relevant materials considered in the preparation of the decision letter, including all written submissions by the bank. If the national bank disagrees with the response from the deputy comptroller or district administrator, a senior official of the bank may further appeal the matter to the ombudsman. The appeal decision letter from the deputy comptroller to the bank will notify the bank of this option. The bank must file written notice of this second-tier appeal within 30 calendar days of receiving the appeal decision letter from the appropriate deputy comptroller or district administrator. Recusal of the Deputy Comptroller or District Administrator: In cases where the deputy comptroller or district administrator directly or indirectly participated in making the decision under review, he/she must transfer the appeal to the ombudsman after advising the appellant. The same is true if he/she directly or indirectly reports to the agency official who made the decision under review. o Fair Lending-Related Matters. When the OCC has made a determination that there is reason to believe there exists an instance or pattern or practice of discrimination that will result in either a referral to the Department of Justice or notification to the Department of Housing and Urban Development, the senior deputy comptroller for Bank Supervision-Operations will provide written notice to the bank of this finding. National banks may file an appeal to the ombudsman for reconsideration of this decision within 15 calendar days of the date of this letter. o Shared National Credits. Bank senior management should notify the examiner-in-charge assigned to the bank when any significant disagreement becomes apparent with a decision rendered through the Shared National Credit Program. If the bank and the examining team are unable to resolve the disagreement through informal discussions, the bank is encouraged to appeal the decision to the deputy comptroller for Multinational Banking. Who May Submit a SNC Appeal: A SNC appeal may be submitted by the agent bank directly, or on behalf of any of the participating national banks. If the agent bank refuses, for whatever reason, to file the appeal on behalf of the bank group, Multinational Banking will accept an appeal from any one participating bank. Banks must file SNC appeals with the regulator that supervises the agent bank. Therefore, if a state member bank is a participant in a credit that is agented by a national bank, the state-member bank must file its appeal with the OCC. Conversely, if a national bank is a participant in a credit for which a state-member bank is agent, the national bank must file its appeal with the Federal Reserve Board. When there is no agent bank named, the appeal should be filed through the regulator that supervises the bank at which the SNC was reviewed. To ensure that the bank's senior management supports the appeal, the chief executive officer (CEO) must submit all SNC appeals. Timing of SNC Appeals: The agent bank should normally file a SNC appeal within 14 days of notification by the examiner-in-charge of the preliminary disposition of the credit. Multinational Banking will evaluate the timing of SNC appeals filed by a participant bank(s) (in the absence of an appeal by the agent), if not filed within the 14-day period. Multinational Banking will also evaluate on a case-by-case basis the reasonableness of appeals delayed by other extenuating circumstances. Participating banks sometimes comment that they are unable to file an appeal within the prescribed time frames. This is because they are not aware of the disposition of any credit until officially notified by OCC at the end of the SNC processing period (usually late July or early August). Agent and participant banks should follow standards for "prudent transfer of credit information" as described in Banking Circular 181 (REV), "Purchases of Loans in Whole or in Part Ä Participations." The guidance set forth in that issuance applies to all participating banks, whatever their relationship to the lead or agent bank. The SNC preliminary notification letter authorizes agent or review banks, at their option, to notify participating banks of the preliminary disposition of each credit. The regulatory agencies perform the SNC review at the same time each year. In the absence of such preliminary notification from the agent during the Spring review or Fall re-reviews, participating banks should request from the agent the information on facts underlying any examiner criticisms of loans in the SNC program. The report of shared national credits is issued annually to national banks participating in the SNC Program at the end of each SNC review. Because of processing deadlines, the report may not reflect decisions on SNC appeals submitted beyond the 14-day filing period. In such cases, Multinational Banking will send a supplemental letter to each participating institution notifying them of the results of the appeal. The letter will also communicate any necessary revisions to each bank's report of shared national credits. SNC Appeal Letter: In drafting a SNC appeal letter, senior bank management should explain why it disagrees with the SNC decision. The SNC appeal letter must identify the credit, commitment amount, disposition, basis for the bank's disagreement, and any documentation that supports management's position on the matter(s) in dispute. Banks should address all SNC appeals as follows: Deputy Comptroller for Multinational Banking, Comptroller of the Currency, Washington, DC 20219. SNC Appeal Processing: Once a SNC appeal is received in the Washington Office, the deputy comptroller for Multinational Banking will immediately acknowledge receipt by letter to the CEO of the bank filing the appeal. Multinational Banking will normally forward a copy of the appeal letter and supporting information to the voting team within three working days of the receipt date. The voting team will then confirm the accuracy of the facts presented in the appeal letter. Multinational Banking will also forward a copy of the appeal letter to the examiner-in-charge of the bank and to the appropriate SNC field coordinator. Each individual should provide his/her formal comments and opinions to the deputy comptroller for Multinational Banking within 10 working days after the receipt date. The deputy comptroller for Multinational Banking will normally grant requests by bank management for a meeting to discuss the issues in dispute. A SNC appeals panel, consisting of examiners designated by the deputy comptroller of Multinational Banking, or his/her designee, will evaluate the decision of the voting team. Until the regulatory agencies develop an interagency statement on SNC appeals, the OCC will consult with FRB and FDIC on all appeals from national banks. Multinational Banking will normally conclude the entire SNC appeal process by July 31. Immediately after issuing a decision letter, the deputy comptroller for Multinational Banking will forward to the ombudsman copies of all relevant materials considered in preparation of the response, including all written submissions by the bank. If a bank disagrees with the decision rendered through the SNC appeals process, it may further appeal the matter to the ombudsman. The appeal decision letter from the deputy comptroller to the bank will notify the bank of this option. The bank must file written notice of this second-tier appeal within 30 calendar days of receiving the appeal decision letter from the deputy comptroller for Multinational Banking. For more information concerning the appeal of a Shared National Credit decision, please contact the Washington SNC Program Manager in Multinational Banking at (202) 874-4610. Effect of Filing an Appeal As a general rule, filing an appeal under any of the options available serves to stay all agency decisions and actions until the appropriate OCC official resolves the appeal. A stay does not allow a corporate matter to be approved simply by the passage of time. In the appropriate circumstances, however, the ombudsman or appropriate OCC official may put the disputed agency decision or action into effect while the appeal is still pending. Follow-up by the Ombudsman After the appropriate OCC official renders a decision on an appeal, the ombudsman will contact the appellant bank to ask whether the bank believes OCC examiners have taken actions against the bank in retaliation for its appeal. The ombudsman will make these contacts (1) six months after the date of the decision letter, and (2) six months after the date of completion of the first examination of the appellant bank following its appeal. A national bank may, of course, contact the ombudsman any time during or after the appeal if the bank reasonably believes that an OCC official is retaliating against it for its appeal. Upon identifying or learning of any possible retaliatory actions, the ombudsman will investigate the complaint. In the absence of extenuating circumstances, such investigations will be completed within 30 days. If the ombudsman finds that retaliation has occurred, he/she will forward the complaint to the senior deputy comptroller for Bank Supervision-Operations or inspector general for appropriate action, including disciplinary action consistent with OCC policies and procedures. In addition, to prevent future retaliation for an appeal, the ombudsman may recommend to the Comptroller that the next examination of the national bank exclude personnel involved in a ruling appealed by that bank. The Comptroller will make the final decision on any exclusion. Liaison Activity of Ombudsman In addition to hearing and deciding appeals brought by national banks, the ombudsman is available to act as a liaison between the OCC and any affected person(s). Such help may relate to any problem or question the party may have in dealing with the OCC resulting from the OCC's regulatory activities. The ombudsman will either provide the requested information or direct the person to the appropriate point of contact. In so doing, the ombudsman will ensure that safeguards exist to encourage persons to come forward and to preserve the confidentiality of those seeking information or identifying a concern. Interested parties may also call the OCC's Customer Assistance Hotline, located in the OCC's Washington office, to report any problems or concerns they may have regarding national banks. The toll-free number is 1-800-613-6743. In addition, interested persons may also comment on proposed OCC rulemakings published in the Federal Register for notice and comment by filing written comments with the OCC, as described in the rulemaking. Eugene A. Ludwig Comptroller of the Currency Date: February 23, 1996 Attachment: Fed. Reg. Vol. 61, No. 37, pg. 7042, February 23, 1996