An Appealing Option

OCC Ombudsman Larry Hattix

Former Comptroller of the Currency, Eugene “Gene” Ludwig, created the OCC's Ombudsman's Office in 1993.  The effectiveness of this program led to a statutory requirement for all federal bank regulatory agencies to establish an independent intra-agency appellate process, including a requirement for each agency to appoint an ombudsman (Section 4806 of the Regulatory Improvement Act of 1994).  Almost 20 years later, the OCC Ombudsman's Office remains in very capable hands, led by a veteran national bank examiner, Larry Hattix.  The current appeals guidance, for national banks and thrifts, is contained in OCC Bulletin 2011-44 – Bank Appeals Process –Guidance for Bankers.

The guidance outlines two tracks for the review of matters that qualify for a bank or thrift appeal.  For the purposes of this article, the term “bank” will mean a national bank or federal savings association.

Using the case of a community bank, the bank's board of directors has the choice to submit the matter directly to the Ombudsman or to the bank's OCC district deputy comptroller (or in the case of an extremely troubled bank, the Deputy Comptroller for Special Supervision in Washington, D.C.).   I've recently been asked how a community bank's board of directors might choose one path for appealable matters over the other.  Here is my advice:

First, for any preliminary examination determination that may ultimately become an appealable matter, work with your examiner-in-charge and the Assistant Deputy Comptroller of your local OCC field office to try to resolve the matter. Working things out before an examination report is submitted for processing is the best and least costly step, in time and effort, for all concerned.

When a final examination report is rendered and decisions have become final, the community bank's board of directors may continue to feel that it wants to pursue an appealable matter.   In that case, my advice is that they initially go through the bank's district deputy comptroller only if their bank is a CAMELS Composite 1- or 2-rated community bank without an informal or formal enforcement action. Otherwise, take the matter directly to the Ombudsman's Office.

Here is the logic:  If your community bank is CAMELS Composite 2-rated with an informal or formal enforcement action (in place or pending), or 3-rated, or 4-rated under $1 billion in assets, the final decision regarding your bank's examination results and CAMELS ratings was made by the district deputy comptroller, through the mechanism of a District Supervision Review Committee (DSRC).  The same decision-making authority, for extremely troubled banks (4-rated over $1 billion in assets or any 5-rated), is vested in the Deputy Comptroller for Special Supervision in Washington.

OCC Bulletin 2011-44, Bank AppealsProcess – Guidance for Bankers, has this important provision: “Recusal of the Deputy Comptroller: If the Deputy Comptroller directly or indirectly participated in making the decision under review, he or she must transfer the appeal to the Ombudsman after advising the appellant.”

Taking either appeals route, through the appropriate supervisory office or through the Ombudsman, a community bank board of directors will find seasoned and experienced professionals who want to be open, reasonable and equitable.  

And remember, though some decisions are not appealable as outlined in OCC Bulletin 2011-44, the building blocks that led up to the final decisions, and now support those decisions, may themselves be appealable.