FDIC, OCC Proposals on Confidential Supervisory Information Would Reduce Uncertainty

Washington, D.C. - FDIC and OCC proposals to modernize rules on disclosure of confidential supervisory information would bring welcome flexibility, but targeted changes would further strengthen the framework, the Bank Policy Institute said in two comment letters.

"The proposed changes streamline the flow of information without compromising safety. The updates would eliminate uncertainty and friction created by the current rules. In addition to the proposed modifications, the agencies should consider defining CSI more clearly, replacing prescriptive requirements and enhancing coordination. With such targeted adjustments, the resulting framework would enable banks to share information more efficiently with trusted parties who need it while maintaining robust safeguards." - Jeffrey Luther, BPI Vice President, Assistant General Counsel 

Background. CSI includes bank examination reports and ratings, supervisory sanctions like Matters Requiring Attention and correspondence with examiners. The banking agencies maintain that such materials are their property, and unauthorized disclosure is prohibited.

• Current CSI rules create uncertainty for banks about when they are allowed to share CSI, including within their own institution. The new proposals would reduce that uncertainty by permitting banks to share CSI without prior OCC or FDIC approval with authorized, appropriate recipients like affiliates, majority shareholders or certain service providers.

• However, to fully achieve the proposal's objectives, the FDIC and OCC should make targeted changes that support efficiency and consistency while maintaining appropriate safeguards.

Recommendations. The FDIC and OCC should:

• Define confidential information clearly and precisely, and in a manner that does not result in institution-generated materials becoming CSI in the institution's hands merely because they are provided to, discussed with or reviewed by the FDIC or OCC.

• Replace prescriptive confidentiality agreement requirements with a principles-based framework.

• Revise the framework for disclosure to affiliates, service providers, prospective senior officers, participants in M&A transactions, trade associations and other banking supervisors.

• Expand the categories of third parties that may receive CSI without prior agency approval to include, among others, prospective directors, majority shareholders and, in the case of the FDIC, trade associations of which an institution is a member.

• Provide supervised entities with certain procedural protections, including notice and an opportunity to object, before an agency makes a discretionary disclosure of institution-specific CSI.
• Work together with the Federal Reserve to align the federal banking agencies' regulations on CSI.

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About Bank Policy Institute

The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud and other information security issues.

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