September 12, 2018

NCUA, bureau, others clarify use of supervisory guidance

Five federal regulators on Tuesday – including the NCUA and Bureau of Consumer Financial Protection – issued a joint statement explaining the role of supervisory guidance and the regulators' approach to such guidance.

The explanation noted that supervisory guidance "does not have the force and effect of law" and that the agencies "do not take enforcement actions based on supervisory guidance." Going forward, the agencies said they will limit the use of "numerical thresholds or other 'bright-lines' in describing expectations in supervisory guidance."

Along with the NCUA and bureau, the statement was issued by the Federal Reserve, FDIC and Office of the Comptroller of the Currency.

Earlier this summer, House Financial Services Subcommittee Chairman Blaine Luetkemeyer, R-Mo., told regulatory agencies that their issued guidance should not be held by examiners as "binding obligations on the institutions they supervise." He urged that this trend of "regulation by enforcement" be reversed – a point NAFCU has also stressed with regulators.

In the regulators' statement, they clarified that examiners "will not criticize a supervised financial institution for a 'violation' of supervisory guidance" but that they may reference guidance to serve as an example of safe and sound conduct.

The statement also made clear that regulators may continue to seek public comment on guidance and will aim to reduce duplicate guidance documents.