U.S. bank regulators say supervisory guidance has no legal weight

By Pete Schroeder

WASHINGTON (Reuters) – U.S. bank regulators clarified on Tuesday that supervisory guidance is not legally binding, in response to industry criticism that agencies are increasingly relying on such guidance.

The joint statement is the most explicit move yet by regulators to downplay guidance such as advisories, bulletins, and frequently asked questions, which banks and Republicans say could circumvent the more rigorous process of writing unambiguous rules.

“Supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance,” the regulators said.

The statement was issued by the Federal Reserve, Federal Deposit Insurance Corporation, National Credit Union Administration, Consumer Financial Protection Bureau and Office of the Comptroller of the Currency.

Guidance should be seen as strictly informational, outlining agency expectations and views, they added.

Regulators said examiners would not criticize banks for running afoul of guidance, noting that violations occur only if laws, rules or enforcement orders are ignored. They will limit the use of numerical thresholds and tests that could appear to establish explicit boundaries for compliance.

In October, the Government Accountability Office said regulator guidelines on leveraged lending amounted to a formal rule and could be subject to congressional review and potential repeal.

Regulators responded by stating their guidance was not intended to carry the formal weight of regulations.

In a June letter, U.S. Representative Blaine Luetkemeyer told regulators they should make clear that guidance does not hold the same weight as laws and regulations. The Missouri Republican, a senior member of the House Financial Services Committee, said he had heard complaints that examiners were relying on guidance for regulatory oversight.

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