I 
112TH CONGRESS 
1ST SESSION H. R. 3461 
To improve the examination of depository institutions, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
NOVEMBER 17, 2011 
Mrs. CAPITO (for herself, Mrs. MALONEY, Mr. BACHUS, Mr. SCHWEIKERT, 
Mr. POSEY, Mr. WESTMORELAND, Mr. RENACCI, Mr. CARNEY, Mr. 
PEARCE, and Mr. DUFFY) introduced the following bill; which was re-
ferred to the Committee on Financial Services 
A BILL 
To improve the examination of depository institutions, and 
for other purposes. 
Be it enacted by the Senate and House of Representa-
tives 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: 
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‘‘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 informa-
tion by the institution relating to the examina-
tion. 
‘‘(2) EXIT INTERVIEW.—If a financial institu-
tion 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 commence-
ment of the examination, except that such period 
may be extended by the Federal financial institu-
tions regulatory agency by providing written notice 
to the institution and the Office of Examination 
Ombudsman describing with particularity the rea-
sons 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 an 
appendix listing all examination or other factual informa-
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tion relied upon by the agency in support of a material 
supervisory determination.’’. 
SEC. 3. EXAMINATION STANDARDS. 
(a) IN GENERAL.—The Federal Financial Institu-
tions Examination Council Act of 1978 is further amended 
by adding after section 1012 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 bor-
rower demonstrates the ability to perform on such 
loan over a maximum period of 6 months, except 
that with respect to loans on a quarterly, semi-
annual, or longer repayment schedule such period 
shall be a maximum of 3 consecutive repayment pe-
riods; 
‘‘(3) a new appraisal on a performing commer-
cial 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 
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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 Fed-
eral financial institutions regulatory agencies may not re-
quire 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 de-
velop and apply identical definitions and reporting require-
ments for non-accrual loans.’’. 
(b) DEFINITION OF MATERIAL SUPERVISORY DE-
TERMINATION.—Section 309(f)(1)(A) of the Riegle Com-
munity 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 atten-
tion by the institution’s management or 
board of directors; and’’. 
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SEC. 4. EXAMINATION OMBUDSMAN. 
(a) IN GENERAL.—The Federal Financial Institu-
tions Examination Council Act of 1978 is further amended 
by adding after section 1013 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 po-
sition 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 Exam-
ination Ombudsman. 
‘‘(d) DUTIES.—The Ombudsman shall— 
‘‘(1) receive and, at the Ombudsman’s discre-
tion, investigate complaints from financial institu-
tions, their representatives, or another entity acting 
on behalf of such institutions, concerning examina-
tions, examination practices, or examination reports; 
‘‘(2) hold meetings, at least once every three 
months and in locations designed to encourage par-
ticipation from all sections of the United States, 
with financial institutions, their representatives, or 
another entity acting on behalf of such institutions, 
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to discuss examination procedures, examination 
practices, or examination policies; 
‘‘(3) review examination procedures of the Fed-
eral financial institutions regulatory agencies to en-
sure 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 Improve-
ment Act of 1994; and 
‘‘(6) report annually to the Committee on Fi-
nancial Services of the House of Representatives, the 
Committee on Banking, Housing, and Urban Affairs 
of the Senate, and the Council, on the reviews car-
ried out pursuant to paragraphs (3) and (4), includ-
ing compliance with the requirements set forth in 
section 1012 regarding timeliness of examination re-
ports, and the Council’s recommendations for im-
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provements in examination procedures, practices, 
and policies. 
‘‘(e) CONFIDENTIALITY.—The Ombudsman shall 
keep confidential all meetings, discussions, and informa-
tion provided by financial institutions.’’. 
(b) DEFINITION.—Section 1003 of the Federal Fi-
nancial Institutions Examination Council Act of 1978 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 Om-
budsman established under section 1014(a).’’. 
SEC. 5. RIGHT TO APPEAL BEFORE AN INDEPENDENT AD-
MINISTRATIVE LAW JUDGE. 
The Federal Financial Institutions Examination 
Council Act of 1978 is further amended by adding after 
section 1014 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. 
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‘‘(b) NOTICE.— 
‘‘(1) TIMING.—A financial institution seeking 
an appeal under this section shall file a written no-
tice with the Ombudsman within 60 days after re-
ceiving the final report or examination that is the 
subject of such appeal. 
‘‘(2) IDENTIFICATION
OF
DETERMINATION.— 
The written notice shall identify the material super-
visory determination that is the subject of the ap-
peal, and a statement of the reasons why the institu-
tion believes that the determination is incorrect or 
should otherwise be modified. 
‘‘(3) INFORMATION TO BE PROVIDED TO INSTI-
TUTION.—Any information relied upon by the agen-
cy 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 ADMINISTRA-
TIVE LAW JUDGE.— 
‘‘(1) IN GENERAL.—The Ombudsman shall de-
termine the merits of the appeal on the record, after 
an opportunity for a hearing before an independent 
administrative law judge. 
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‘‘(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 proce-
dures 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 determina-
tion 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 Ombuds-
man on an appeal under this section shall— 
‘‘(1) be made not later than 60 days after the 
record has been closed; and 
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‘‘(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 annu-
ally 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 ap-
peals 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 infor-
mation about individual financial institutions or any con-
fidential or privileged information shared by financial in-
stitutions. 
‘‘(f) RETALIATION PROHIBITED.—A Federal finan-
cial institutions regulatory agency may not— 
‘‘(1) retaliate against a financial institution, in-
cluding service providers, or any institution-affiliated 
party, for exercising appellate rights under this sec-
tion; or 
‘‘(2) delay or deny any agency action that 
would benefit a financial institution or any institu-
tion-affiliated party on the basis that an appeal 
under this section is pending under this section.’’. 
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SEC. 6. ADDITIONAL AMENDMENTS. 
(a) RIEGLE COMMUNITY DEVELOPMENT AND REGU-
LATORY IMPROVEMENT ACT OF 1994.—Section 309 of the 
Riegle Community Development and Regulatory Improve-
ment Act of 1994 (12 U.S.C. 4806), is amended— 
(1) in subsection (a), by inserting after ‘‘appro-
priate Federal banking agency’’ the following: ‘‘, the 
Bureau of Consumer Financial Protection,’’; 
(2) in subsection (b)— 
(A) in paragraph (2), by striking ‘‘the ap-
pellant from retaliation by agency examiners’’ 
and inserting ‘‘the insured depository institu-
tion or insured credit union from retaliation by 
the agencies referred to in subsection (a)’’; and 
(B) by adding at the end the following 
flush-left text: 
‘‘For purposes of this subsection and subsection (e), retal-
iation includes delaying consideration of, or withholding 
approval of, any request, notice, or application that other-
wise 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; 
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(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 insti-
tution 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 Con-
sumer Financial Protection,’’ before ‘‘any Federal banking 
agency’’ each place such 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 such 
term appears. 
(d) TECHNICAL CORRECTIONS.—The Federal Finan-
cial Institutions Examination Council Act of 1978 (12 
U.S.C. 3301 et seq.) is amended— 
(1) in section 1003(1), by striking ‘‘the Office 
of Thrift Supervision,’’; and 
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(2) in section 1005, by striking ‘‘One-fifth’’ and 
inserting ‘‘One-fourth’’. 
Æ 
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