Portman sponsors bipartisan legislation to reform examination process for financial institutions

On Thursday, U.S. Senator Rob Portman (R-Ohio) sponsored The Financial Institutions Examination Fairness and Reform Act (S. 774).

The bipartisan legislation, introduced by Senators Jerry Moran (R-Kan.), Joe Manchin (D-W.Va.) and Shelley Moore Capito (R-W.Va.), would reform the examination process for financial institutions by requiring regulatory agencies to issue examination determinations promptly, as well as give banks and other supervised financial institutions the right to have those determinations reviewed.
 
“Unfortunately, Washington regulations have made it harder for Main Street lenders to support Ohio workers,” Portman said. “Giving financial institutions the ability to independently review their examinations creates a better environment for transparency that ultimately helps protect consumers.”
 
“We are pleased Senator Portman is supportive of this important legislation,” Paul Mercer, President of the Ohio Credit Union League, said. “Clarity, consistency and fairness are integral components of the examination process, and this legislation is a needed step toward improving Federal examinations.”
 
“Ohio’s banks have been struggling under the weight of increased regulatory burden, especially in the wake of the overreach of Dodd Frank,” said Jeffrey Quayle, Senior Vice President & General Counsel of the Ohio Bankers Benefits Trust. “We commend Senator Portman for co-sponsoring this bipartisan legislation, which will improve the consistency and quality of bank regulation. This will be another important step to opening up lending to consumers and small businesses.”
 
Specifically, S. 774 would:
 
• Impose reasonable limits on examiners to provide their conclusions to the institutions they examine and to make available upon request the information relied upon for those determinations;

• Establish an independent examination review director. This individual would be retained by the Federal Financial Examinations Institution Council and would be authorized to address examination complaints and review examination procedures; and

• Provide financial institutions with the right to seek review of supervisory determinations with the Independent Examination Review Director. The legislation authorizes the director to review the examination record and – at the institution’s request – direct an evidentiary hearing to enable the director to decide whether the agency’s examination determination shall be upheld.
 

The Financial Institutions Examination Fairness and Reform Act also incorporates important safeguards to ensure that financial institutions will not abuse the review process to delay or evade appropriate supervisory action. An institution can seek review of an agency determination only if the determination is significant – such as a rating downgrade, imposition of a “matter requiring attention,” or suspension of the institution’s ability to open new bank branches or engage in other significant transactions.

The review process also incorporates strict time limits. Finally, S. 774 will not prevent a regulatory agency from imposing supervisory restrictions on an institution or pursuing administrative enforcement of agency rules and regulations. 
 
The bill is supported by the American Bankers Association (ABA), Credit Union National Association (CUNA), National Association of Federal Credit Unions (NAFCU) and the Independent Community Bankers of America (ICBA).