Enforcement

Overview of the Enforcement Process

Formal enforcement actions may be initiated by Federal regulatory agencies

To change the status of a federally insured depository institution or credit union ("insured institution") or because of its condition
As a result of acts or practices by the insured institution and/or its institution-affiliated parties IAPs

IAPs, like insured depository institutions, are subject to enforcement actions by the primary federal regulator of the institution

Actions may be taken by consent or may require formal administrative hearings

Changes in an institution's status include the following

Voluntary termination of insurance by an insured institution
Termination of insurance where the insured institution is not engaged in the business of receiving deposits
Termination of insurance where an insured institutions assets and liabilities have been acquired by another institution

Formal enforcement actions based upon the condition of an insured depository institution include the following

Termination of insurance where an insured depository institution is in an unsafe or unsound condition; where it or its directors or trustees have engaged or are engaging in unsafe or unsound practices, violated any applicable law, regulation, order, condition imposed in writing by the appropriate Federal regulatory agency, or violated a written agreement with the appropriate Federal regulatory agency
Issuance of a capital directive or requiring prompt corrective action by institutions which are undercapitalized in varying degrees
Appointment of a conservator or receiver

Formal enforcement actions based upon action or inaction by an insured depository institution or its IAPs may result from, among other things

Contravening of standards, guidelines and policy statements
Violations of law, regulations, or written agreements
Money laundering
Golden parachutes
Adverse contracts
Reporting violations
Incomplete or inaccurate books and records
Inaccurate certifications
Call report violations
Being charged with a felony
Conviction of a crime involving dishonesty or breach of trust

Prevailing party if not the agency in a contested enforcement action might be entitled to attorney's fees

Institution Affiliated Parties IAPs defined

The term institution affiliated party means

Any director, officer, employee, or controlling stockholder other than a bank holding company of, or agent for, an insured depository institution;
Any other person who has filed or is required to file a change-in-control notice with the appropriate Federal banking agency under 12 USC 1817(j)
Any shareholder (other than a bank holding company), consultant, joint venture partner, and any other person as determined by the appropriate Federal banking agency (by regulation or case-by-case) who participates in the conduct of the affairs of an insured depository institution
Any independent contractor (including any attorney, appraiser, or accountant) who knowingly or recklessly participates in

Any violation of any law or regulation
Any breach of fiduciary duty; or
Any unsafe or unsound practice, which caused or is likely to cause more than a minimal financial loss to, or a significant adverse effect on, the insured depository institution 12 USC 1813(u)

Unsafe or unsound practices

Enforcement Regulations

OCC - National banks

FRB - Member banks, bank holding companies

FDIC - State non-member banks

OTS - Savings and loans, mutual savings banks, S&L holding companies

NCUA - Credit unions

FFIEC Appraisal Subcommittee- real estate appraisers

State Enforcement Actions individual states

Specific types of enforcement actions

Agency actions include both formal and informal, some involving decisions on applications, others involving safety and soundness and consumer compliance issues

Among the more prevalent types of safety and soundness actions are the following

Informal actions
Written agreements
Cease and Desist Orders C&D - includes restitution orders and temporary C&D Orders with asset freezes
Civil Money Penalties CMP
Suspension, removal and prohibition
Prompt corrective action
Termination of insurance

See, for example, the FDIC's itemized list of 29 different types of agency actions

NCUA uses the terminology Administrative Orders which include Suspension, Removal and Prohibition, C&D Orders and CMPs; Letters of Understanding and Agreement which include Written Agreements; and Documents of Resolution which cover Informal Actions

Agencies also have the authority to prosecute enforcement actions against accountants, municipal securities dealers, clearing agencies and transfer agents

Each of the federal banking agencies and many of the state agencies maintain on their websites databases of enforcement actions indexed by Type of Action and Name of Party institution or IAP

OCC Enforcement actions by type of action, bank or IAP name
Federal Reserve Board enforcement actions by name of party or type of action
FDIC enforcement decisions and orders
OTS enforcement orders database
NCUA database of Administrative Orders and Letters of Understanding and Agreement LUAs
States

Other available types of enforcement actions include

Safety and Soundness Orders
Capital Directives
Disapproval of directors and senior executive officers

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