FDIC updates supervisory guidance on terminating C&D, consent orders

Two chapters of an agency enforcement action manual that provides guidance to its staff on terminations of cease-and-desist (C&D) and consent orders have been updated by the Federal Deposit Insurance Corp. (FDIC), the agency announced in a Financial Institution Letter (FIL) Monday.

The FDIC said it revised chapters 1 and 4 of its Formal and Informal Enforcement Actions Manual. Titled “Overview and Administrative Matters” and “Cease-and-Desist Actions,” these chapters address the agency’s minimum standards for terminating C&D and consent orders issued under section 8(b) of the Federal Deposit Insurance (FDI) Act.

The agency noted that Section 8(b) of the FDI Act permits the FDIC to issue such orders to address a supervised institution’s unsafe or unsound practice in conducting business; or a violation of a law and/or regulation, written agreement with the FDIC, or written condition imposed by the FDIC in connection with the granting of any application or other request.

In FIL-34-2022, the agency said that section 8(b) orders may be terminated under any of the following conditions:

  • The institution is in full compliance with all the provisions of the order and has fully corrected the violations of laws and regulations, unsafe and unsound practices, or conditions that led to the issuance of the order.
  • Any provisions deemed “not in compliance” have become outdated or irrelevant to the institution’s current circumstances, including situations in which the institution is closed.
  • Deterioration or any provisions deemed “not in compliance” leads to issuance of a new or revised formal action.

“There may be limited exceptions in which replacing an enforcement action with a less severe or less comprehensive action may be appropriate,” the letter noted. Such exceptions, it said, must be presented to the appropriate FDIC division director and the general counsel and require consultation with the agency’s chairman. “Use of the limited exception is expected to be rare,” it noted.

FDIC FIL-34-2022