Senators introduce legislation to increase transparency for bank exam process

TOPEKA, Kan. (WIBW) - U.S. Senators Jerry Moran (R-Kan.) and Joe Manchin (D-W.V.) announced on Thursday, Dec. 14 that they introduced legislation to increase transparency for the bank exam process.

Officials with Senator Moran said the legislation helps create a fair appeals process for banks and increase transparency for the bank examination process.

According to officials with Senator Moran, a fair and effective supervisory examination process for banks is important for maintaining a health and transparent financial system. The Fair Audits and Inspections for Regulators’ (FAIR) Exams Act would bring more accountability to bank examinations by establishing an appeals process to resolve disagreements between banks and regulators by hiring an independent director to review appeals. This legislation would provide small lenders with more clarity and representation, allowing them to continue serving their communities efficiently by receiving results faster and more transparently.

Senator Moran said the bank exam process should be fair to bankers.

“The bank examination process should be free from bias and fair to bankers,” said Sen. Moran. “This legislation will help bring much-needed transparency to the examination process to make certain all banks – particularly rural, community banks – are treated fairly and afforded due process through a rigorous appeals process.”

Senator Manchin indicated having a fair exam process is vital to the health of the U.S. banking system.

“An effective and fair examination process for financial institutions is vital to the health of our banking system and beneficial for consumers, especially in rural states like West Virginia,” said Sen. Manchin. “I’m proud to reintroduce the bipartisan FAIR Exams Act, which would ensure any bank or financial institution that undergoes a supervisory exam has an impartial third party that reviews these exam findings before regulatory agencies can take action against them. I encourage my colleagues on both sides of the aisle to support this commonsense bill to strengthen transparency in our financial institutions and increase accountability on agencies.”

According to Senator Moran’s officials, this legislation is co-sponsored by Sens. Thom Tillis (R-N.C.) and Bill Hagerty (R-Tenn.)

Officials with Senator Moran noted the FAIR Exams Act would include the following:

Require the appropriate regulatory agencies to issue timely responses to bankers during the examinations process;
Require the Federal Financial Institutions Examinations Council (FFIEC) to make available upon request the information relied upon for determinations;
Create an Independent Examination Review Director within the FFIEC to address examination complaints and procedures;
Provide financial institutions with the right to seek review of supervisory determinations with the Independent Examination Review Director; and
Authorize the director to review the examination record and, at the institution’s request, refer the appeal to an administrative law judge.

ICBA President and CEO Romero Rainey said they strongly support the policy.

“ICBA and the nation’s community banks strongly support policy reforms that will ensure due process for banks appealing supervisory decisions to promote trust and accountability in the appeals process,” said Rainey. “Following the FDIC’s disbandment of its independent appeals office less than six months after it became operational, we thank Sen. Moran for introducing the FAIR Exams Act to provide for a fair and effective supervisory bank examination process, which will help maintain a healthy and transparent financial system.”

President and CEO of American Bankers Rob Nichols stated that they applaud the senators for their introduction of the FAIR Exams Act.

“ABA applauds Sen. Moran and his cosponsors on their introduction of the FAIR Exams Act, a bipartisan bill that will bring clarity to the examination process and provide due process for community banks,” said Nichols. “By ensuring greater transparency for banks and greater accountability for examiners, this bill will make the examination process fairer and our financial system stronger.”