Rules changes, mandated by law, proceeding by agency to allow some previously prohibited to resume working at banks

Changes to rules that will allow persons who were previously prohibited from working at or serving a bank and will now let those individuals take those positions were announced Thursday by the federal bank deposit insurance agency.

The changes to regulations implementing section 19 of the Federal Deposit Insurance Act, the Federal Deposit Insurance Corp. (FDIC) said in a financial institution letter (FIL-09-2023), will include:

  • Revisions to the Section 19 application form, industry guidance, and implementing regulations. The application is for persons previously prohibited by the FDIC (or other federal financial institution regulators) to work at a bank, or serve on the bank’s board or committees;
  • Review of Section 19 Orders and Section 19 Letters previously published on the FDIC’s website to determine whether particular orders and letters should be terminated (as to orders) and removed from the webpage (as to both types of documents).

The rule changes are prompted by legislation enacted late last year, the Fair Hiring in Banking Act (contained in the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023 [NDAA]), which took effect Dec. 23, the date it was signed by President Joe Biden (D).

“Section 19 prohibits a person from participating in the affairs of an FDIC-insured institution if he or she has been convicted of an offense involving dishonesty, breach of trust, or money laundering, or has entered into a pretrial diversion or similar program in connection with a prosecution for such an offense, without the prior written consent of the FDIC,” the agency noted.

The legislation, the agency said, includes several specific changes to Section 19, including:

  • Excluding certain older offenses from the scope of the section based on the amount of time that has passed since the offense occurred or since the individual was released from incarceration. The legislation excludes certain offenses from the scope of the section that were committed by individuals 21 or younger.
  • Excluding certain “lesser offenses” from the scope of the section (such as use of a fake ID, shoplifting, trespass, fare evasion, driving with an expired license or tag, and “such other low-risk offenses”).
  • Excluding certain offenses from the definition of “criminal offense involving dishonesty” such as misdemeanor criminal offenses committed more than one year before the date on which an individual files a consent application, excluding any period of incarceration; or an offense involving the possession of controlled substances.
  • Excluding certain offenses from the scope of the section that have been expunged, sealed, or dismissed.

Fair Hiring in Banking Act Amends Section 19 of the Federal Deposit Insurance Act

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