Sunshine at FDIC: Application Procedures Manual Excerpts Released

Financial Services Law

It’s out with the guesswork for those entities regulated or insured by the Federal Deposit Insurance Corporation (FDIC). In an effort to provide greater transparency regarding the internal processes, the agency posted sections of its Application Procedures Manual to its website.

Financial Institution Letter (FIL)-38-2019 is the first in a series of releases that will eventually form the complete manual, the FDIC said.

What happened

Shining a light on internal procedures, the FDIC’s Applications Procedures Manual provides comprehensive direction for professional staff assigned to review and process applications, notices and other requests that are submitted to the FDIC.

While the agency cautioned that the manual does not establish supervisory requirements and is not industry guidance, its release aims to provide the banking industry with transparency and clarity regarding the FDIC’s filing-related processes, it explained.

The initial release features an overview section discussing processing time frames, filing receipt and acknowledgment, filing acceptance, review and evaluation of filing content, document preparation, delegations of authority, and other topics that are generally applicable to most types of filings.

For example, the overview states that a case manager is responsible for “reviewing, evaluating and processing all filings submitted by institutions within their assigned caseloads.” The case manager must assess whether the proposal could change an institution’s business plan, strategy, operations and risk profile, and is expected to use sound judgment in analyzing all filings to determine the impact of the proposal on overall safety and soundness of the institution, according to the manual.

The FDIC also released separate sections addressing certain specific filing types: federal deposit insurance, mergers, change in control, branch establishment, branch relocation and branch closings. Each section defines relevant terms and reviews the requirements for the filing.

In the section on changes in control, the FDIC listed the types of transactions that require prior written notice (such as the acquisition of the power, directly or indirectly, through ownership or otherwise, to direct the management or policies of a covered institution), as well as transactions that require notice, albeit not prior notice (the acquisition of voting securities through inheritance, for instance) and transactions that do not require notice (including a customary, one-time solicitation of a revocable proxy).

Forms of notice are also provided, along with a step-by-step instructions for case managers to process the notice.

Other topics in the first release include denials and disapprovals, background investigations, and the National Historic Preservation Act and National Environmental Policy Act.

To read FIL-38-2019, click here.

To read the sections of the Applications Procedures Manual released to date, click here.

Why it matters

This is useful stuff for FDIC junkies (and attorneys). The release is just the first portion of the Applications Procedures Manual the FDIC will make public on its website, with the entire manual set to be shared in coming weeks, as well as periodic updates for changes in laws, regulations or processes. Although the FDIC cautioned covered institutions that the manual does not constitute industry guidance or establish supervisory requirements, it does provide “comprehensive instruction” for reviewing and processing filings, the agency said.