“Guidance” is Not the Same as Law: The Role of Supervisory Guidance for Regulated Financial Institutions
“Supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance.”
On September 11, 2018, the Bureau of the Consumer Financial Protection, together with the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration and the Office of the Comptroller of the Currency (the “agencies”) issued a joint statement clarifying the role of supervisory guidance (the “Joint Statement”), stating unequivocally that “[s]upervisory guidance does not have the force and effect of law.”
While this might seem an obvious statement, the Joint Statement may be viewed by financial institutions and financial services providers as a welcome step in clearing often murky regulatory waters with their examiners. Many of our financial institution clients have experienced compliance challenges when an agency attempts to regulate its practices through such guidance.
Legal, Compliance, Risk and Operations departments may not be as quick to celebrate the Joint Statement. The practical reality is that supervisory guidance will continue to remain important as a useful resource for these departments in their management of regulatory compliance requirements. Although agencies “do not take enforcement actions based on supervisory guidance” and “will not criticize a supervised financial institution for a ‘violation’ of supervisory guidance”, the Joint Statement explains that such guidance still indicates an agency’s expectations and its view of appropriate practices.
This blog was written by Julie Levi and Benjamin Guthorn at Miles & Stockbridge.
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