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[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 2160 Introduced in Senate (IS)]

112th CONGRESS
  2d Session
                                S. 2160

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

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             March 6, 2012

Mr. Moran (for himself and Mr. Manchin) introduced the following bill; 
which was read twice and referred to the Committee on Banking, Housing, 
                           and Urban Affairs

_______________________________________________________________________

                                 A BILL

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

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Financial Institutions Examination 
Fairness and Reform Act''.

SEC. 2. TIMELINESS OF EXAMINATION REPORTS.

    The Federal Financial Institutions Examination Council Act of 1978 
(12 U.S.C. 3301 et seq.) is amended by adding at the end the following:

``SEC. 1012. TIMELINESS OF EXAMINATION REPORTS.

    ``(a) In General.--
            ``(1) Final examination report.--A Federal financial 
        institutions regulatory agency shall provide a final 
        examination report to a financial institution not later than 60 
        days after the later of--
                    ``(A) the exit interview for an examination of the 
                institution; or
                    ``(B) the provision of additional information by 
                the institution relating to the examination.
            ``(2) Exit interview.--If a financial institution is not 
        subject to a resident examiner program, the exit interview 
        shall occur not later than the end of the 9-month period 
        beginning on the commencement of the examination, except that 
        such period may be extended by the Federal financial 
        institutions regulatory agency by providing written notice to 
        the institution and the Office of Examination Ombudsman 
        describing with particularity the reasons that a longer period 
        is needed to complete the examination.
    ``(b) Examination Materials.--Upon the request of a financial 
institution, the Federal financial institutions regulatory agency shall 
include with the final report under this section an appendix listing 
all examination or other factual information relied upon by the agency 
in support of a material supervisory determination.''.

SEC. 3. EXAMINATION STANDARDS.

    (a) In General.--The Federal Financial Institutions Examination 
Council Act of 1978 (12 U.S.C. 3301 et seq.) is amended by adding at 
the end the following:

``SEC. 1013. EXAMINATION STANDARDS.

    ``(a) In General.--In the examination of financial institutions--
            ``(1) a commercial loan shall not be placed in non-accrual 
        status solely because the collateral for such loan has 
        deteriorated in value;
            ``(2) a modified or restructured commercial loan shall be 
        removed from non-accrual status if the borrower demonstrates 
        the ability to perform on such loan over a maximum period of 6 
        months, except that with respect to loans on a quarterly, 
        semiannual, or longer repayment schedule such period shall be a 
        maximum of 3 consecutive repayment periods;
            ``(3) a new appraisal on a performing commercial loan shall 
        not be required unless an advance of new funds is involved;
            ``(4) in classifying a commercial loan in which there has 
        been deterioration in collateral value, the amount to be 
        classified shall be the portion of the deficiency relating to 
        the decline in collateral value and repayment capacity of the 
        borrower.
    ``(b) Well Capitalized Institutions.--The Federal financial 
institutions regulatory agencies may not require a financial 
institution that is well capitalized to raise additional capital in 
lieu of an action prohibited under subsection (a).
    ``(c) Consistent Loan Classifications.--The Federal financial 
institutions regulatory agencies shall develop and apply identical 
definitions and reporting requirements for non-accrual loans.''.
    (b) Definition of Material Supervisory Determination.--Section 
309(f)(1)(A) of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (12 U.S.C. 4806(f)(1)(A)) is amended--
            (1) in clause (ii), by striking ``and'' at the end; and
            (2) by inserting after clause (iii) the following:
                            ``(iv) any issue specifically listed in an 
                        exam report as a matter requiring attention by 
                        the institution's management or board of 
                        directors; and''.

SEC. 4. EXAMINATION OMBUDSMAN.

    (a) In General.--The Federal Financial Institutions Examination 
Council Act of 1978 (12 U.S.C. 3301 et seq.) is amended by adding at 
the end the following:

``SEC. 1014. OFFICE OF EXAMINATION OMBUDSMAN.

    ``(a) Establishment.--There is established in the Council an Office 
of Examination Ombudsman.
    ``(b) Head of Office.--There is established the position of the 
Ombudsman, who shall serve as the head of the Office of Examination 
Ombudsman, and who shall be hired separately by the Council and shall 
be independent from any member agency of the Council.
    ``(c) Staffing.--The Ombudsman is authorized to hire staff to 
support the activities of the Office of Examination Ombudsman.
    ``(d) Duties.--The Ombudsman shall--
            ``(1) receive and, at the Ombudsman's discretion, 
        investigate complaints from financial institutions, their 
        representatives, or another entity acting on behalf of such 
        institutions, concerning examinations, examination practices, 
        or examination reports;
            ``(2) hold meetings, at least once every three months and 
        in locations designed to encourage participation from all 
        sections of the United States, with financial institutions, 
        their representatives, or another entity acting on behalf of 
        such institutions, to discuss examination procedures, 
        examination practices, or examination policies;
            ``(3) review examination procedures of the Federal 
        financial institutions regulatory agencies to ensure that the 
        written examination policies of those agencies are being 
        followed in practice and adhere to the standards for 
        consistency established by the Council;
            ``(4) conduct a continuing and regular program of 
        examination quality assurance for all examination types 
        conducted by the Federal financial institutions regulatory 
        agencies;
            ``(5) process any supervisory appeal initiated under 
        section 1015 or section 309(e) of the Riegle Community 
        Development and Regulatory Improvement Act of 1994; and
            ``(6) report annually to the Committee on Financial 
        Services of the House of Representatives, the Committee on 
        Banking, Housing, and Urban Affairs of the Senate, and the 
        Council, on the reviews carried out pursuant to paragraphs (3) 
        and (4), including compliance with the requirements set forth 
        in section 1012 regarding timeliness of examination reports, 
        and the Council's recommendations for improvements in 
        examination procedures, practices, and policies.
    ``(e) Confidentiality.--The Ombudsman shall keep confidential all 
meetings, discussions, and information provided by financial 
institutions.''.
    (b) Definition.--Section 1003 of the Federal Financial Institutions 
Examination Council Act of 1978 (12 U.S.C. 3302) is amended--
            (1) in paragraph (2), by striking ``and'' at the end;
            (2) in paragraph (3), by adding ``and'' at the end; and
            (3) by adding at the end the following:
            ``(4) the term `Ombudsman' means the Ombudsman established 
        under section 1014.''.

SEC. 5. RIGHT TO APPEAL BEFORE AN INDEPENDENT ADMINISTRATIVE LAW JUDGE.

    The Federal Financial Institutions Examination Council Act of 1978 
(12 U.S.C. 3301 et seq.) is amended by adding at the end the following:

``SEC. 1015. RIGHT TO APPEAL BEFORE AN INDEPENDENT ADMINISTRATIVE LAW 
              JUDGE.

    ``(a) In General.--A financial institution shall have the right to 
appeal a material supervisory determination contained in a final report 
of examination.
    ``(b) Notice.--
            ``(1) Timing.--A financial institution seeking an appeal 
        under this section shall file a written notice with the 
        Ombudsman within 60 days after receiving the final report or 
        examination that is the subject of such appeal.
            ``(2) Identification of determination.--The written notice 
        shall identify the material supervisory determination that is 
        the subject of the appeal, and a statement of the reasons why 
        the institution believes that the determination is incorrect or 
        should otherwise be modified.
            ``(3) Information to be provided to institution.--Any 
        information relied upon by the agency in the final report that 
        is not in the possession of the financial institution may be 
        requested by the financial institution and shall be delivered 
        promptly by the agency to the financial institution.
    ``(c) Hearing Before Independent Administrative Law Judge.--
            ``(1) In general.--The Ombudsman shall determine the merits 
        of the appeal on the record, after an opportunity for a hearing 
        before an independent administrative law judge.
            ``(2) Hearing procedures.--If a hearing is requested by the 
        financial institution, the hearing shall--
                    ``(A) take place not later than 60 days after the 
                notice of the appeal was received by the Ombudsman; and
                    ``(B) be conducted pursuant to the procedures set 
                forth under sections 556 and 557 of title 5, United 
                States Code.
            ``(3) Judge recommendation; standard of review.--In any 
        hearing under this subsection--
                    ``(A) the administrative law judge shall recommend 
                to the Ombudsman what determination should be made; and
                    ``(B) in making such recommendation, the 
                administrative law judge shall not defer to the 
                opinions of the examiner or agency, but shall 
                independently determine the appropriateness of the 
                agency's decision based upon the relevant statutes, 
                regulations, and other appropriate guidance.
    ``(d) Final Decision.--A decision by the Ombudsman on an appeal 
under this section shall--
            ``(1) be made not later than 60 days after the record has 
        been closed; and
            ``(2) be final agency action, and shall bind the agency 
        whose supervisory determination was the subject of the appeal 
        and the financial institution making the appeal.
    ``(e) Report.--The Ombudsman shall report annually to the Committee 
on Financial Services of the House of Representatives, the Committee on 
Banking, Housing, and Urban Affairs of the Senate on actions taken on 
appeals under this section, including the types of issues that 
financial institutions have appealed and the results of those appeals. 
In no case shall such a report contain information about individual 
financial institutions or any confidential or privileged information 
shared by financial institutions.
    ``(f) Retaliation Prohibited.--A Federal financial institutions 
regulatory agency may not--
            ``(1) retaliate against a financial institution, including 
        service providers, or any institution-affiliated party, for 
        exercising appellate rights under this section; or
            ``(2) delay or deny any agency action that would benefit a 
        financial institution or any institution-affiliated party on 
        the basis that an appeal under this section is pending under 
        this section.''.

SEC. 6. ADDITIONAL AMENDMENTS.

    (a) Riegle Community Development and Regulatory Improvement Act of 
1994.--Section 309 of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (12 U.S.C. 4806) is amended--
            (1) in subsection (a), by inserting after ``appropriate 
        Federal banking agency'' the following: ``, the Bureau of 
        Consumer Financial Protection,'';
            (2) in subsection (b)--
                    (A) in paragraph (2), by striking ``the appellant 
                from retaliation by agency examiners'' and inserting 
                ``the insured depository institution or insured credit 
                union from retaliation by an agency referred to in 
                subsection (a)'';
                    (B) by redesignating paragraphs (1) and (2) as 
                subparagraphs (A) and (B), respectively, and adjusting 
                the margins accordingly;
                    (C) by striking ``In establishing'' and inserting 
                the following:
            ``(1) In general.--In establishing''; and
                    (D) by adding at the end the following:
            ``(2) Retaliation.--For purposes of this subsection and 
        subsection (e), retaliation includes delaying consideration of, 
        or withholding approval of, any request, notice, or application 
        that otherwise would have been approved, but for the exercise 
        of the institution's or credit union's rights under this 
        section.''; and
            (3) in subsection (e)(2)--
                    (A) in subparagraph (B), by striking ``and'' at the 
                end;
                    (B) in subparagraph (C), by striking the period and 
                inserting ``; and''; and
                    (C) by adding at the end the following:
                    ``(D) ensure that appropriate safeguards exist for 
                protecting the insured depository institution or 
                insured credit union from retaliation by any agency 
                referred to in subsection (a) for exercising its rights 
                under this subsection.''.
    (b) Federal Deposit Insurance Act.--Section 18(x) of the Federal 
Deposit Insurance Act (12 U.S.C. 1828(x)) is amended by inserting ``the 
Bureau of Consumer Financial Protection,'' before ``any Federal banking 
agency'' each place that term appears.
    (c) Federal Credit Union Act.--Section 205(j) of the Federal Credit 
Union Act (12 U.S.C. 1785(j)) is amended by inserting ``the Bureau of 
Consumer Financial Protection,'' before ``the Administration'' each 
place that term appears.
    (d) Technical Corrections.--The Federal Financial Institutions 
Examination Council Act of 1978 (12 U.S.C. 3301 et seq.) is amended--
            (1) in section 1003(1) (12 U.S.C. 3302(1)), by striking 
        ``the Office of Thrift Supervision,''; and
            (2) in section 1005 (12 U.S.C. 3304), by striking ``One-
        fifth'' and inserting ``One-fourth''.
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