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F e d e r a l R e s e r v e Ba n k
DALLAS, TEXAS
of
Dallas
75222
Circular No. 80-156
August 11, 1980
POLICY REGARDING ASSESSMENT OF
CIVIL MONEY PENALTIES
TO ALL MEMBER BANKS
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
The Federal Reserve Board has approved a supervisory policy for the
assessment of civil money penalties for violation of certain laws. The policy,
developed by the Federal Financial Institutions Examination Council and adopted
by the Board, is an addition to the Board's existing policies for implementation
of the civil money penalties provision of the Financial Institutions Regulatory
and Interest Rate Control Act.
The Financial Institutions Regulatory and Interest Rate Control Act
of 1980 provides that the Board may assess penalties for violations of certain
provisions of statutes including the Change in Bank Control Act, the National
Banking Act, the Bank Holding Company Act, and the Federal Reserve Act.
The principal points of the policy are:
a.
Establishment of procedures by the bank regulatory agencies for
the exchange of detailed reports on enforcement actions taken,
and
b.
Specification of the factors that should be taken into con
sideration in deciding whether, and in what amounts, civil
money penalties should be imposed.
A more detailed outline of the supervisory policy is attached.
Sincerely yours,
Robert H. Boykin
First Vice President
Enclosure
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
INTERAGENCY POLICY REGARDING THE ASSESSMENT OF CIVIL
MONEY PENALTIES BY THE FEDERAL FINANCIAL INSTITUTIONS
REGULATORY AGENCIES
Under p r o v is io n s o f th e F i n a n c i a l I n s t i t u t i o n s R egu latory
and I n t e r e s t Rate C ontrol A ct o f 1978 ("FIRA"), 92 S t a t . 3641, the
F e d e ra l f i n a n c i a l i n s t i t u t i o n s r e g u la t o r y a g e n c ie s are
a u th o r iz e d to
a s s e s s c i v i l money p e n a l t i e s fo r v i o l a t i o n s o f v a r io u s F e d e ra l s t a t u t e s
and r e g u l a t io n s promulgated th ereu n d er. The a g e n c ie s a re each a u th o r iz e d
to a s s e s s a c i v i l money p e n a lt y f o r a v i o l a t i o n o f th e terms o f a f i n a l
c e a s e and d e s i s t o r d e r . The Board o f Governors o f th e F ed era l R eserve
System , the O f f i c e o f th e C om ptroller o f th e Currency, and th e F ed era l
D e p o s it Insu ran ce C orp oration a re each a u th o r iz e d to a s s e s s c i v i l money
p e n a l t i e s fo r v i o l a t i o n s o f :
(1)
s e c t i o n s 2 2 (h ) and 23A o f th e F e d e ra l R eserve
A ct ( r e s p e c t i v e l y , l i m i t a t i o n s on lo a n s by i n
sured banks to t h e i r e x e c u t i v e o f f i c e r s , d i r e c
t o r s and p r i n c i p a l sh a r e h o ld e r s and l i m i t a t i o n s
on lo a n s by in su red banks to t h e i r a f f i l i a t e s ) ;
(2 )
the p r o h ib it i o n s o f T i t l e V III o f FIRA (12 U .S .C .
§ 1 9 7 2 (2 )) a g a in s t p r e f e r e n t i a l le n d in g to bank
e x e c u t i v e o f f i c e r s , d i r e c t o r s , and p r in c i p a l
sh a r e h o ld e r s based upon a co rresp o n d en t accou n t
r e l a t i o n s h i p ; and
(3 )
a w i l l f u l v i o l a t i o n o f th e Change i n Bank C ontrol
A ct o f 1978 (12 U .S .C . § 1 8 1 7 ( j ) ) .
In a d d i t i o n , th e Board i s a u th o r iz e d to a s s e s s c i v i l money p e n a l t i e s
f o r v i o l a t i o n s o f s e c t i o n s 19 and 22 o f th e F ed era l R eserve A ct ( r e s e r v e
req u ir e m e n ts, i n t e r e s t r a t e l i m i t a t i o n s and l i m i t a t i o n s on lo a n s to
e x e c u t i v e o f f i c e r s o f member banks) and f o r v i o l a t i o n s o f th e Bank Hold
in g Company A ct o f 1956, a s amended (12 U .S .C . §§ 1 8 4 1 -1 8 4 9 ). The
C om ptroller may a s s e s s p e n a l t i e s fo r v i o l a t i o n s o f s e c t i o n 2 2 (g ) o f the
F e d e ra l R eserve A ct and any p r o v is io n o f th e N a tio n a l Banking A c t . The
F e d e ra l Savings and Loan Insu ran ce C orp oration i s a u th o r iz e d to a s s e s s
a c i v i l money p e n a lt y fo r a v i o l a t i o n o f th e S a vin gs and Loan Holding
Company A ct (12 U .S.C . § 1730a) and th e Change in S avin gs and Loan Con
t r o l A ct o f 1978 (12 U .S .C . § 1 7 3 0 ( q ) ) .
The maximum c i v i l p e n a lt y t h a t may be a s s e s s e d i s g e n e r a l ly
$ 1 ,0 0 0 per day f o r each day th e v i o l a t i o n c o n t in u e s . The maximum c i v i l
p e n a l t i e s a re $100 per day f o r a v i o l a t i o n o f s e c t i o n 19 o f th e F ed era l
R eserve A ct and $ 1 0 ,0 0 0 per day fo r a v i o l a t i o n o f th e Change
i n Bank
C ontrol A ct and th e Change i n S avin gs and Loan C ontrol A c t . In d e t e r
m ining th e amount o f th e p e n a lt y , th e FIRA p r o v is io n s r e q u ir e the
a p p r o p r ia te agency to c o n s id e r th e f i n a n c i a l r e s o u r c e s and good f a i t h
o f the company or p erson ch arged , th e g r a v i t y o f th e v i o l a t i o n , any
h i s t o r y o f p r e v io u s v i o l a t i o n s , and such o th e r m a tte r s a s j u s t i c e may
r e q u ir e .
-2 -
The a g e n c ie s have adopted amendments to t h e i r R ules o f P r a c t ic e
and Procedure to implement t h e i r c i v i l money p e n a lt y a u t h o r i t y . ! / The
p roced u res a re e s s e n t i a l l y uniform among th e a g e n c i e s . The agency p ro
ced u res p ro v id e f o r th e commencement o f c i v i l money p e n a lty p ro cee d in g s
w it h th e is s u a n c e o f a n o t i c e o f a s s e s s m e n t. The n o t i c e g e n e r a l ly c o n ta in s
(1 )
a sta tem en t o f the l e g a l a u t h o r it y f o r th e a sse ssm e n t;
(2 )
th e amount o f th e proposed p e n a lt y ;
(3 )
th e f a c t u a l or l e g a l grounds fo r th e a s se ss m e n t;
(4 )
a d v ic e to th e p erso n b e in g a s s e s s e d o f a r i g h t to
a
form al a d m in is t r a t iv e h ea rin g on th e a s s e s s m e n t; and
(5 )
a d v ic e r eg a r d in g th e 10 day tim e l i m i t to r e q u e s t
a h e a r in g .
such
Under th e FIRA c i v i l p e n a lt y p r o v i s i o n s , th e p erson a g a in s t
whom a p e n a lt y i s a s s e s s e d has th e o p p o r tu n ity to c h a lle n g e th e a s s e s s
ment in a form al a d m in is t r a t iv e h ea rin g — and, f o ll o w i n g th e h e a r in g ,
to o b t a in j u d i c i a l rev iew o f any a sse ssm en t i n an a p p r o p r ia te U nited
S t a t e s co u rt o f a p p e a ls . Under th e Change in Bank C ontrol Act and th e
Change in S avin gs and Loan C on tro l A c t , th e p erson i s e n t i t l e d to a
t r i a l on th e a sse ssm e n t in an a p p ro p ria te U n ited S t a t e s d i s t r i c t c o u r t .
To p ro v id e guidance i n th e p roced u res and c r i t e r i a used by th e
a g e n c ie s in th e a sse ssm en t o f c i v i l money p e n a l t i e s under th e FIRA p r o
v i s i o n s and to promote c o o r d in a t io n among th e a g e n c ie s in the a sse ssm en t
o f p e n a l t i e s , th e C oun cil has recommended t h i s s u p e r v is o r y p o l i c y .
1.
I n te r a g e n c y N o t i f i c a t i o n o f C i v i l Money P e n a lty A ss e s s m e n ts .
Any F e d e r a l bank r e g u la t o r y agency
p e n a lt y a sse ssm en t w i l l n o t i f y th e o th e r two
a g e n c i e s . The o th e r F e d e ra l bank r e g u la t o r y
n is h e d c o p ie s or summaries o f any n o t i c e s o f
ment o r d e r s .
th a t i n i t i a t e s a c i v i l money
F ed era l bank r e g u la t o r y
a g e n c ie s s h a l l a l s o be f u r
a s se ss m e n t and f i n a l a s s e s s
1 / These r u le s a re c o d i f i e d a t 12 C .F.R . P a r ts 19, 2 6 3 , 3 0 8 , and 747
( 1 9 8 0 ).
2 / The F e d e ra l R eserve B o ard 's R ules o f P r a c t ic e p r o v id e a p erso n a g a in s t
whom a p e n a lty i s b e in g c o n s id e r e d w it h an o p p o r tu n ity , p r io r to th e form al
is s u a n c e o f a n o t i c e o f a s s e s s m e n t, to submit w r i t t e n comments and fo r an
in fo rm a l co n fe r e n c e w it h th e B o a rd 's s t a f f to show t h a t a proposed p e n a lty
i s in a p p r o p r ia te or shou ld be reduced in amount. The o th e r a g e n c ie s have
adopted a s i m i l a r in fo r m a l procedure as a m a tter o f i n t e r n a l agency p o l i c y .
-3 -
Any F e d e ra l f i n a n c i a l i n s t i t u t i o n s r e g u la t o r y agency th a t
a s s e s s e s a c i v i l money p e n a lt y f o r a v i o l a t i o n o f th e terms o f a f i n a l
c e a s e and d e s i s t order or f o r a v i o l a t i o n o f th e Change i n Bank C ontrol
A ct or th e Change in Savin gs and Loan C ontrol A ct w i l l p r o v id e th e o th e r
a g e n c ie s t h a t have a s se ss m e n t a u t h o r it y f o r v i o l a t i o n s o f s i m i l a r s t a t
u t e s w it h summaries o f the a sse ssm en t a c t i o n w it h o u t i d e n t i f y i n g d e t a i l s
o r o th e r c o n f i d e n t i a l in f o r m a tio n . The F ed era l bank r e g u la t o r y a g e n c ie s
w i l l exchange d e t a i l e d and com plete in fo r m a tio n among th em selv es r eg a r d
in g a l l a sse ssm en t a c t i o n s .
The a g e n c ie s b e l i e v e t h a t t h i s p o l i c y o f in te r a g e n c y n o t i f i c a
t i o n o f c i v i l money p e n a lt y a c t i o n s w i l l promote c o n s is t e n c y among the
a g e n c ie s in a sse ssm en t s i t u a t i o n s , p a r t i c u l a r l y in th e c a s e o f s t a t u t e s
where th e a g e n c ie s have s i m i l a r a sse ssm en t a u t h o r it y . The a g e n c ie s a l s o
b e l i e v e t h a t in te r a g e n c y n o t i f i c a t i o n i s d e s i r a b l e in view o f the s i z e
o f th e p e n a l t i e s t h a t may be a s s e s s e d and th e p o s s i b i l i t y o f impact on
a f f i l i a t e d i n s t i t u t i o n s . The procedure i s n o t in ten d ed to p reclu d e or
d e la y any agency from i n i t i a t i n g a c i v i l p e n a lt y a c t i o n .
2.
C o n sid e r a tio n s i n th e A ssessm en t o f C i v i l Money P e n a l t i e s .
In a s s e s s i n g a c i v i l money p e n a lt y under th e v a r io u s FIRA p r o
v i s i o n s , the a g e n c ie s are req u ir e d to c o n s id e r th e s i z e o f th e f i n a n c i a l
r e s o u r c e s and good f a i t h o f th e resp o n d e n t, th e g r a v i t y o f th e v i o l a t i o n ,
th e h i s t o r y o f p r e v io u s v i o l a t i o n s , and such o th e r m a tte r s as j u s t i c e may
r e q u ir e . In d eterm in in g th e amount o f a c i v i l money p e n a lt y , the a g e n c ie s
b e l i e v e t h a t a s i g n i f i c a n t c o n s id e r a t i o n should be the f i n a n c i a l or e c o
nomic b e n e f i t th e resp o n d en t o b ta in ed from th e v i o l a t i o n . A c c o r d in g ly ,
th e a g e n c ie s w i l l c o n s id e r , i n a d d it io n to th e o th e r f a c t o r s s p e c i f i e d
i n th e s t a t u t e , th e f i n a n c i a l o r economic b e n e f i t th e resp on dent d e r iv e d
from th e i l l e g a l a c t i v i t y . The removal o f economic b e n e f i t w i l l , however,
u s u a l l y be i n s u f f i c i e n t by i t s e l f to promote com pliance w it h th e s t a t u t o r y
p r o v i s i o n s . The p e n a lty may, t h e r e f o r e , in a p p ro p ria te circu m sta n ce s
r e f l e c t some a d d i t i o n a l amount beyond th e economic b e n e f i t d e r iv e d t o p ro
v id e a d e t e r r e n t to f u t u r e co n d u ct.
In d eterm in in g th e a p p r o p r ia te n e s s o f i n i t i a t i n g a c i v i l money
p e n a lt y a sse ssm en t p r o c e e d in g , th e a g e n c ie s have i d e n t i f i e d th e f o ll o w i n g
f a c t o r s as r e l e v a n t :
(1)
e v id e n c e t h a t th e v i o l a t i o n or p a t t e r n o f v i o l a t i o n s
was i n t e n t i o n a l or committed w it h a d is r e g a r d o f th e
law or th e con seq u en ces to th e i n s t i t u t i o n ;
(2 )
th e freq u en cy or r ec u r ren ce o f v i o l a t i o n s and th e le n g th
o f time the v i o l a t i o n has been o u t s t a n d in g ;
(3)
c o n t in u a t io n o f a v i o l a t i o n a f t e r th e resp on dent becomes
aware o f i t , or i t s immediate c e s s a t i o n and c o r r e c t i o n ;
(4 )
f a i l u r e to c o o p e r a te w it h th e agency in e f f e c t i n g e a r l y
r e s o l u t i o n o f th e problem;
(5 )
e v id e n c e o f concealm ent o f th e v i o l a t i o n , or i t s
v o lu n ta r y d i s c l o s u r e ;
(6 )
any t h r e a t o f or a c t u a l l o s s or o t h e r harm to th e
i n s t i t u t i o n , in c lu d in g harm to p u b lic c o n fid e n c e in
th e i n s t i t u t i o n , and th e d eg ree o f any such harm;
(7 )
e v id e n c e t h a t p a r t i c i p a n t s or t h e i r a s s o c i a t e s r e c e iv e d
f i n a n c i a l or o th e r g a in or b e n e f i t or p r e f e r e n t i a l t r e a t
ment a s a r e s u l t o f or from th e v i o l a t i o n ;
(8 )
e v id e n c e o f any r e s t i t u t i o n by th e p a r t i c i p a n t s i n th e
v io la tio n ;
(9 )
h i s t o r y o f p r io r v i o l a t i o n s , p a r t i c u l a r l y where s i m i l a r
i t i e s e x i s t betw een th o s e and th e v i o l a t i o n under con
sid e r a tio n ;
(10)
p r e v io u s c r i t i c i s m o f th e i n s t i t u t i o n f o r s i m i l a r v i o l a t i o n s
(1 1 )
p r e se n c e or ab sence o f a com pliance program and i t s e f f e c
tiv e n e ss ;
(1 2 )
tendency to c r e a t e u n sa fe or unsound banking p r a c t i c e s or
b reach o f f i d u c i a r y du ty; and
(13)
th e e x i s t e n c e o f ag reem en ts, commitments or o rd ers
in te n d e d to p rev en t th e s u b j e c t v i o l a t i o n .
The d e l i n e a t i o n o f th e s e f a c t o r s i s in ten d ed to p rov id e guidance
r eg a r d in g th e circu m sta n ce s under which th e a g e n c ie s may i n i t i a t e a c i v i l
money p e n a lt y a c t i o n and i s n o t in ten d ed to p reclu d e any F e d e ra l f i n a n c i a l
i n s t i t u t i o n s r e g u la t o r y agency from c o n s id e r in g any o th e r m a tte r s r e le v a n t
to th e a p p r o p r ia te n e s s o f a c i v i l money p e n a lt y a s se ss m e n t.
@FedFRASER