NYLIB Supports Option for Financial Institutions to Challenge "CAMELS" Ratings

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The New York League of Independent Bankers (NYLIB) has joined other banking industry organizations in filing a friend-of-the-court brief in Builders Bank v. FDIC regarding whether the federal financial regulatory agencies' "CAMELS" ratings are reviewable in federal court. NYLIB believes support of this matter is important to ensure that banks have the ability to challenge ratings they feel are undeserved and to ensure that the power of the federal regulatory agencies does not go unchecked. Click here to read the amicus brief. 

A Look at the Issues    

Builders Bank brought suit in federal court challenging the composite rating of "4" assigned to it by the FDIC, and sought a reversal of that rating along with a refund of the excess deposit insurance premiums it incurred due to the rating.

In response, the FDIC sought to dismiss Builders Bank's suit, arguing that a CAMELS rating is not reviewable in federal court unless a financial institution first obtains review of the rating through the FDIC's intra-agency appeals process. The FDIC's motion to dismiss further contended that, even if an institution prosecutes an intra-agency appeal, CAMELS ratings are never reviewable by the federal courts because there is no meaningful source of law to apply to review the FDIC's exercise of discretion in assessing CAMELS ratings.

NYLIB's amicus brief challenges both of these contentions. Pinchus D. Raice, Co-Chair of Pryor Cashman's Financial Institution Group, explained, "While the federal financial regulatory agencies' intra-agency appeals processes can provide a useful method of challenging unwarranted CAMELS ratings, no statute or regulation requires financial institutions that have been assigned unwarranted CAMELS ratings to utilize the agencies' intra-agency appeals processes. In appropriate circumstances, a financial institution should have the option to seek review of a CAMELS rating in federal court -- whether or not the institution has chosen to utilize the examining agency's intra-agency appeals process." 

Banking Industry Support    

Sarah Ciopyk, NYLIB's Executive Director, commented, "It is important to provide an industry viewpoint on complex legal and regulatory issues that have a systemic, industry-wide impact, and NYLIB appreciates the opportunity to make its voice heard on the important issues before the Court in Builders Bank v. FDIC. NYLIB hopes that its amicus brief will be of assistance to the Court."  

The Clearing House Association, the American Bankers Association, and the Independent Community Bankers of America also previously submitted a joint amicus brief in the case.