February 16, 2012

Federal Reserve Staffer Provides Overview of Ombuds Program

In testimony before Congress earlier this month, Kevin M. Bertsch, an Associate Director in the Federal Reserve System's Division of Banking Supervision and Regulation, addressed the role of the agency's External Ombudsman. In essence, he explained that the Federal Reserve System Ombuds provides an alternative dispute mechanism for bankers' concerns about the fairness of the Fed's supervisory process.

Here's an except from his testimony:
[T]he Federal Reserve also has an Ombudsman to provide banks with a means of raising issues regarding the examination process that are maintained in confidence. The Ombudsman also will provide information regarding the appeals process. The Ombudsman provides a neutral, independent, objective facilitator and mediator for the resolution of issues and complaints related to the System's regulatory and supervisory activities. The Ombudsman actively works with banking firms that have concerns about examinations and other supervisory matters, and works independently from the supervisory chain of command. The Ombudsman has broad authority to mediate complaints, including the authority to refer matters to the appropriate Federal Reserve Board committee.

The Federal Reserve maintains a strong anti-retaliation policy to protect any person who uses the appeals process or who contacts the Ombudsman with concerns. The Ombudsman reaches out to every institution that has filed an appeal within six months after the appeal has been decided to inquire whether retaliation has taken place. The Ombudsman also has broad authority to investigate claims of retaliation. Where appropriate, and when corrective action has not been taken, the Ombudsman reports retaliation complaints to the appropriate Federal Reserve Board committee.

The Federal Reserve continues to evaluate methods for improving its appeals process. At the same time, it has been our experience that most disagreements regarding supervisory matters are resolved promptly and informally through direct discussion between the Reserve Banks and the affected institutions, and we would not want to discourage this means of resolution. 
Bertsch appeared before the House Committee on Financial Services, Subcommittee on Financial Institutions and Consumer Credit, to discuss the Federal Reserve's perspective on HR 3461, the "Financial Institutions Examination Fairness and Reform Act." Among other things, that bill would create an "Examination Ombudsman" to independently investigate and adjudicate complaints about the bank examinations. Although the Fed's Ombuds program has a similar purview, it does not have investigatory or adjudicatory powers. The current Ombudsman for the Federal Reserve System is Margaret McCloskey Shanks, who also serves as the Associate Secretary of the Board. (Federal Reserve News; OpenCongress HR 3461.)

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