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Appeal of an OCC's Denial of Branch Relocation - (Fourth Quarter 1999)


A bank formally appealed the OCC's denial of an application to relocate a particular branch to another location within the same city.  Management's primary basis for the appeal was that they believed the relocation was favorable from an economic and Community Reinvestment Act (CRA) perspective.  Management also believed that the bank had received inequitable treatment from the supervisory office.


The OCC is required by law and regulation to take into account the bank's record of performance under the CRA when evaluating relocation (and other) applications.  At the time of the relocation application, the bank's CRA record of performance was rated "needs to improve."


The denial was appropriate in light of the bank's CRA record of performance at the time of the decision.  However, during the processing of the appeal, the bank informed the ombudsman that it had made an investment of $1.6 million in mortgage-backed securities through a particular public acceptance corporation.

In light of the recent qualified investment, and with an understanding of the economic benefit to the bank, the ombudsman opined that the OCC should approve the relocation with a "pre-consummation" requirement.  Bank management was allowed to proceed with the lease negotiations; however, the branch could not relocate until a new relocation application was filed and approved, the supervisory office performed a CRA examination, and the bank received at least a "satisfactory" rating in its record of performance under the CRA.  This decision was subject to the bank not encountering any severe financial, operational, or other difficulties before the new application was approved.

After careful consideration of all the facts and circumstances, the ombudsman found no evidence that the bank received inequitable treatment from the supervisory office.

Appeal of a Denial of a FIRREA Section 914 Notice - (Fourth Quarter 1999)


The ombudsman received an appeal of a denial of a Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) Section 914 notice of a bank's proposal to have an individual serve as a director for a troubled institution.  The disapproval was based on the individual's involvement in a complex financial transaction while serving as an executive officer of another bank.  The denial letter stated the lack of judgment displayed in the transaction reflected negatively on the individual's competence, character, and integrity.  The appellate submission stated that the events that provided the basis for the OCC's denial should be viewed in a different perspective and the transaction serves as evidence of both the integrity and competence of the individual asking to serve.

Discussion and Conclusion

The statute, 12 USC 1831i (e), "Standard for Disapproval," states:

The appropriate federal banking agency shall issue a notice of disapproval with respect to the notice submitted pursuant to subsection (a) if the competence, experience, character, or integrity of the individual with respect to whom such a notice is submitted indicates that it would not be in the best interests of the depositors of the depository institution or the best interest of the public to permit the individual to be employed by, or associated with, the depository institution or depository institution holding company.

In this case the ombudsman considered all aspects of the case including interviews with the board of directors of the institution where the transaction occurred, the person's experience in troubled institutions, and an interview of the individual asking to serve as a director.  The information obtained in the ombudsman's review did not eliminate the concern caused by the transaction.  In addition, the decision to disapprove the individual was not inconsistent with the provisions of 12 USC 1831i (e).  Therefore, the ombudsman did not reverse the prior disapproval of the proposal to appoint the individual to the board of directors for the troubled institution.

Addendum: Given the personal nature of section 914 requests, specific details of the referenced financial transaction are not disclosed to maintain confidentiality.