Nation’s bank exam process gets an update under Hill’s bipartisan measure

U.S. Rep. French Hill (R-AR) on April 18 offered a bipartisan bill that would resolve disagreements between banks and regulators by improving supervisory bank exams.

“My legislation is a win for the banking industry and greatly increases the transparency and fairness in the bank examination process,” said Rep. Hill.

The Fair Audits and Inspections for Regulators’ Exams Act, H.R. 8071, which Rep. Hill sponsored alongside lead original cosponsor U.S. Rep. David Scott (D-GA), would amend the Federal Financial Institutions Examination Council Act of 1978 to improve the examination of depository institutions, according to the text of the bill.

“Banks deserve to experience a fair and efficient supervisory examination process,” Rep. Hill said. “The Fair Exams Act will allow any bank — including our community and rural banks in Arkansas — to appeal a supervisory determination through a third-party, independent director for review.”

Rep. Scott pointed out that the bank examination process is the first line of defense against threats to bank safety and soundness. 

“Unfortunately, in the event of a bank having deficiencies in their examinations, poor responsiveness can result in smaller community banks running the risk of going out of business,” he said. “Establishing a stronger appeals process, specifically one to better support community banks, is critical to the stability of our banking system.”

If enacted, H.R. 8071 would authorize financial institutions to seek a prompt, independent review of a Material Supervisory Determination (MSD) from a regulatory exam and would require bank examiners to conduct and complete exams no later than 60 days after the exam exit interview and share with banks the materials relied on in making the MSD, according to a bill summary provided by Rep. Hill’s staff.

Additionally, H.R. 8071 would establish a new Office of Independent Examination Review to adjudicate MSD appeals and prohibit federal financial regulators from retaliating against a financial institution for exercising its appellate rights under the bill, the summary says.

The American Bankers Association, the Independent Community Bankers of America, and the American Fintech Council endorsed H.R. 8071, which is the companion bill to the same-named S. 3541, introduced in December 2023 by U.S. Sens. Jerry Moran (R-KS) and Joe Manchin (D-WV).