I 

113TH CONGRESS 

1ST SESSION H. R. 1553 

To improve the examination of depository institutions, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 15, 2013 

Mrs. CAPITO (for herself, Mrs. CAROLYN B. MALONEY of New York, Mr. CARNEY, Mr. HUIZENGA of Michigan, Mr. LUCAS, Mr. PITTENGER, Mr. 

BARR, Ms. MOORE, Mr. ROSS, Mrs. MCCARTHY of New York, Mr. GARY

G. MILLER of California, Mr. WESTMORELAND, Mr. LUETKEMEYER, Mr. 

HURT, Mrs. WAGNER, Mr. GRIMM, Mr. STIVERS, Mrs. BACHMANN, Mr. 

FITZPATRICK, Mr. KING of New York, Mr. GARRETT, Mr. FINCHER, Mr. 

HINOJOSA, Mr. ROYCE, Mr. POSEY, Mr. PEARCE, Mr. DUFFY, and Mr. 

NEUGEBAUER) introduced the following bill; which was referred to the 

Committee on Financial Services 

A BILL 

To improve the examination of depository institutions, and 

for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Financial Institutions 

5 Examination Fairness and Reform Act’’. 


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1 SEC. 2. TIMELINESS OF EXAMINATION REPORTS. 

2 The Federal Financial Institutions Examination 

3 Council Act of 1978 (12 U.S.C. 3301 et seq.) is amended 

4 by adding at the end the following: 

5 ‘‘SEC. 1012. TIMELINESS OF EXAMINATION REPORTS. 

6 ‘‘(a) IN GENERAL.— 

7 ‘‘(1) FINAL EXAMINATION REPORT.—A Federal 

8 financial institutions regulatory agency shall provide 

9 a final examination report to a financial institution 

10 not later than 60 days after the later of— 

11 ‘‘(A) the exit interview for an examination 

12 of the institution; or 

13 ‘‘(B) the provision of additional informa14 tion by the institution relating to the examina15 tion. 

16 ‘‘(2) EXIT INTERVIEW.—If a financial institu17 tion is not subject to a resident examiner program, 

18 the exit interview shall occur not later than the end 

19 of the 9-month period beginning on the commence20 ment of the examination, except that such period 

21 may be extended by the Federal financial institu22 tions regulatory agency by providing written notice 

23 to the institution and the Office of Examination 

24 Ombudsman describing with particularity the rea25 sons that a longer period is needed to complete the 

26 examination. 


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1 ‘‘(b) EXAMINATION MATERIALS.—Upon the request 

2 of a financial institution, the Federal financial institutions 

3 regulatory agency shall include with the final report an 

4 appendix listing all examination or other factual informa5 tion relied upon by the agency in support of a material 

6 supervisory determination.’’. 

7 SEC. 3. EXAMINATION STANDARDS. 

8 (a) IN GENERAL.—The Federal Financial Institu9 tions Examination Council Act of 1978 is further amended 

10 by adding after section 1012 the following: 

11 ‘‘SEC. 1013. EXAMINATION STANDARDS. 

12 ‘‘(a) IN GENERAL.—In the examination of financial 

13 institutions— 

14 ‘‘(1) a commercial loan shall not be placed in 

15 non-accrual status solely because the collateral for 

16 such loan has deteriorated in value; 

17 ‘‘(2) a modified or restructured commercial loan 

18 shall be removed from non-accrual status if the bor19 rower demonstrates the ability to perform on such 

20 loan over a maximum period of 6 months, except 

21 that with respect to loans on a quarterly, semi22 annual, or longer repayment schedule such period 

23 shall be a maximum of 3 consecutive repayment pe24 riods; 


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1 ‘‘(3) a new appraisal on a performing commer2 cial loan shall not be required unless an advance of 

3 new funds is involved; 

4 ‘‘(4) in classifying a commercial loan in which 

5 there has been deterioration in collateral value, the 

6 amount to be classified shall be the portion of the 

7 deficiency relating to the decline in collateral value 

8 and repayment capacity of the borrower. 

9 ‘‘(b) WELL CAPITALIZED INSTITUTIONS.—The Fed10 eral financial institutions regulatory agencies may not re11 quire a financial institution that is well capitalized to raise 

12 additional capital in lieu of an action prohibited under 

13 subsection (a). 

14 ‘‘(c) CONSISTENT LOAN CLASSIFICATIONS.—The 

15 Federal financial institutions regulatory agencies shall de16 velop and apply identical definitions and reporting require17 ments for non-accrual loans.’’. 

18 (b) DEFINITION OF MATERIAL SUPERVISORY DE19 TERMINATION.—Section 309(f)(1)(A) of the Riegle Com20 munity Development and Regulatory Improvement Act of 

21 1994 (12 U.S.C. 4806(f)(1)(A)) is amended— 

22 (1) in clause (ii), by striking ‘‘and’’ at the end; 

23 and 

24 (2) by inserting after clause (iii) the following: 


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1 ‘‘(iv) any issue specifically listed in an 

2 exam report as a matter requiring atten3 tion by the institution’s management or 

4 board of directors; and’’. 

5 SEC. 4. EXAMINATION OMBUDSMAN. 

6 (a) IN GENERAL.—The Federal Financial Institu7 tions Examination Council Act of 1978 is further amended 

8 by adding after section 1013 the following: 

9 ‘‘SEC. 1014. OFFICE OF EXAMINATION OMBUDSMAN. 

10 ‘‘(a) ESTABLISHMENT.—There is established in the 

11 Council an Office of Examination Ombudsman. 

12 ‘‘(b) HEAD OF OFFICE.—There is established the po13 sition of the Ombudsman, who shall serve as the head of 

14 the Office of Examination Ombudsman, and who shall be 

15 hired separately by the Council and shall be independent 

16 from any member agency of the Council. 

17 ‘‘(c) STAFFING.—The Ombudsman is authorized to 

18 hire staff to support the activities of the Office of Exam19 ination Ombudsman. 

20 ‘‘(d) DUTIES.—The Ombudsman shall— 

21 ‘‘(1) receive and, at the Ombudsman’s discre22 tion, investigate complaints from financial institu23 tions, their representatives, or another entity acting 

24 on behalf of such institutions, concerning examina25 tions, examination practices, or examination reports; 


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1 ‘‘(2) hold meetings, at least once every three 

2 months and in locations designed to encourage par3 ticipation from all sections of the United States, 

4 with financial institutions, their representatives, or 

5 another entity acting on behalf of such institutions, 

6 to discuss examination procedures, examination 

7 practices, or examination policies; 

8 ‘‘(3) review examination procedures of the Fed9 eral financial institutions regulatory agencies to en10 sure that the written examination policies of those 

11 agencies are being followed in practice and adhere to 

12 the standards for consistency established by the 

13 Council; 

14 ‘‘(4) conduct a continuing and regular program 

15 of examination quality assurance for all examination 

16 types conducted by the Federal financial institutions 

17 regulatory agencies; 

18 ‘‘(5) process any supervisory appeal initiated 

19 under section 1015 or section 309(e) of the Riegle 

20 Community Development and Regulatory Improve21 ment Act of 1994; and 

22 ‘‘(6) report annually to the Committee on Fi23 nancial Services of the House of Representatives, the 

24 Committee on Banking, Housing, and Urban Affairs 

25 of the Senate, and the Council, on the reviews carVerDate Mar 15 2010 02:30 Apr 20, 2013 Jkt 029200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1553.IH H1553

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1 ried out pursuant to paragraphs (3) and (4), includ2 ing compliance with the requirements set forth in 

3 section 1012 regarding timeliness of examination re4 ports, and the Council’s recommendations for im5 provements in examination procedures, practices, 

6 and policies. 

7 ‘‘(e) CONFIDENTIALITY.—The Ombudsman shall 

8 keep confidential all meetings, discussions, and informa9 tion provided by financial institutions.’’. 

10 (b) DEFINITION.—Section 1003 of the Federal Fi11 nancial Institutions Examination Council Act of 1978 is 

12 amended— 

13 (1) in paragraph (2), by striking ‘‘and’’ at the 

14 end; 

15 (2) in paragraph (3), by adding ‘‘and’’ at the 

16 end; and 

17 (3) by adding at the end the following: 

18 ‘‘(4) the term ‘Ombudsman’ means the Om19 budsman established under section 1014(a).’’. 

20 SEC. 5. RIGHT TO APPEAL BEFORE AN INDEPENDENT AD21 MINISTRATIVE LAW JUDGE. 

22 The Federal Financial Institutions Examination 

23 Council Act of 1978 is further amended by adding after 

24 section 1014 the following: 


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1 ‘‘SEC. 1015. RIGHT TO APPEAL BEFORE AN INDEPENDENT 

2 ADMINISTRATIVE LAW JUDGE. 

3 ‘‘(a) IN GENERAL.—A financial institution shall have 

4 the right to appeal a material supervisory determination 

5 contained in a final report of examination. 

6 ‘‘(b) NOTICE.— 

7 ‘‘(1) TIMING.—A financial institution seeking 

8 an appeal under this section shall file a written no9 tice with the Ombudsman within 60 days after re10 ceiving the final report or examination that is the 

11 subject of such appeal. 

12 ‘‘(2) IDENTIFICATION OF DETERMINATION.— 

13 The written notice shall identify the material super14 visory determination that is the subject of the ap15 peal, and a statement of the reasons why the institu16 tion believes that the determination is incorrect or 

17 should otherwise be modified. 

18 ‘‘(3) INFORMATION TO BE PROVIDED TO INSTI19 TUTION.—Any information relied upon by the agen20 cy in the final report that is not in the possession 

21 of the financial institution may be requested by the 

22 financial institution and shall be delivered promptly 

23 by the agency to the financial institution. 

24 ‘‘(c) HEARING BEFORE INDEPENDENT ADMINISTRA25 TIVE LAW JUDGE.— 


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1 ‘‘(1) IN GENERAL.—The Ombudsman shall de2 termine the merits of the appeal on the record, after 

3 an opportunity for a hearing before an independent 

4 administrative law judge. 

5 ‘‘(2) HEARING PROCEDURES.—If a hearing is 

6 requested by the financial institution, the hearing 

7 shall— 

8 ‘‘(A) take place not later than 60 days 

9 after the notice of the appeal was received by 

10 the Ombudsman; and 

11 ‘‘(B) be conducted pursuant to the proce12 dures set forth under sections 556 and 557 of 

13 title 5, United States Code. 

14 ‘‘(3) JUDGE RECOMMENDATION; STANDARD OF

15 REVIEW.—In any hearing under this subsection— 

16 ‘‘(A) the administrative law judge shall 

17 recommend to the Ombudsman what determina18 tion should be made; and 

19 ‘‘(B) in making such recommendation, the 

20 administrative law judge shall not defer to the 

21 opinions of the examiner or agency, but shall 

22 independently determine the appropriateness of 

23 the agency’s decision based upon the relevant 

24 statutes, regulations, and other appropriate 

25 guidance. 


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1 ‘‘(d) FINAL DECISION.—A decision by the Ombuds2 man on an appeal under this section shall— 

3 ‘‘(1) be made not later than 60 days after the 

4 record has been closed; and 

5 ‘‘(2) be final agency action and shall bind the 

6 agency whose supervisory determination was the 

7 subject of the appeal and the financial institution 

8 making the appeal. 

9 ‘‘(e) REPORT.—The Ombudsman shall report annu10 ally to the Committee on Financial Services of the House 

11 of Representatives, the Committee on Banking, Housing, 

12 and Urban Affairs of the Senate on actions taken on ap13 peals under this section, including the types of issues that 

14 financial institutions have appealed and the results of 

15 those appeals. In no case shall such a report contain infor16 mation about individual financial institutions or any con17 fidential or privileged information shared by financial in18 stitutions. 

19 ‘‘(f) RETALIATION PROHIBITED.—A Federal finan20 cial institutions regulatory agency may not— 

21 ‘‘(1) retaliate against a financial institution, in22 cluding service providers, or any institution-affiliated 

23 party, for exercising appellate rights under this sec24 tion; or 


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1 ‘‘(2) delay or deny any agency action that 

2 would benefit a financial institution or any institu3 tion-affiliated party on the basis that an appeal 

4 under this section is pending under this section.’’. 

5 SEC. 6. ADDITIONAL AMENDMENTS. 

6 (a) RIEGLE COMMUNITY DEVELOPMENT AND REGU7 LATORY IMPROVEMENT ACT OF 1994.—Section 309 of the 

8 Riegle Community Development and Regulatory Improve9 ment Act of 1994 (12 U.S.C. 4806), is amended— 

10 (1) in subsection (a), by inserting after ‘‘appro11 priate Federal banking agency’’ the following: ‘‘, the 

12 Bureau of Consumer Financial Protection,’’; 

13 (2) in subsection (b)— 

14 (A) in paragraph (2), by striking ‘‘the ap15 pellant from retaliation by agency examiners’’ 

16 and inserting ‘‘the insured depository institu17 tion or insured credit union from retaliation by 

18 the agencies referred to in subsection (a)’’; and 

19 (B) by adding at the end the following 

20 flush-left text: 

21 ‘‘For purposes of this subsection and subsection (e), retal22 iation includes delaying consideration of, or withholding 

23 approval of, any request, notice, or application that other24 wise would have been approved, but for the exercise of the 


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1 institution’s or credit union’s rights under this section.’’; 

2 and 

3 (3) in subsection (e)(2)— 

4 (A) in subparagraph (B), by striking 

5 ‘‘and’’ at the end; 

6 (B) in subparagraph (C), by striking the 

7 period and inserting ‘‘; and’’; and 

8 (C) by adding at the end the following: 

9 ‘‘(D) ensure that appropriate safeguards 

10 exist for protecting the insured depository insti11 tution or insured credit union from retaliation 

12 by any agency referred to in subsection (a) for 

13 exercising its rights under this subsection.’’. 

14 (b) FEDERAL DEPOSIT INSURANCE ACT.—Section 

15 18(x) of the Federal Deposit Insurance Act (12 U.S.C. 

16 1828(x)) is amended by inserting ‘‘the Bureau of Con17 sumer Financial Protection,’’ before ‘‘any Federal banking 

18 agency’’ each place such term appears. 

19 (c) FEDERAL CREDIT UNION ACT.—Section 205(j) 

20 of the Federal Credit Union Act (12 U.S.C. 1785(j)) is 

21 amended by inserting ‘‘the Bureau of Consumer Financial 

22 Protection,’’ before ‘‘the Administration’’ each place such 

23 term appears. 


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1 (d) TECHNICAL CORRECTIONS.—The Federal Finan2 cial Institutions Examination Council Act of 1978 (12 

3 U.S.C. 3301 et seq.) is amended— 

4 (1) in section 1003(1), by striking ‘‘the Office 

5 of Thrift Supervision,’’; and 

6 (2) in section 1005, by striking ‘‘One-fifth’’ and 

7 inserting ‘‘One-fourth’’. 

Æ 


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