FRB Broadens Post-Employment Restrictions on Examiners

The Board of Governors of the Federal Reserve System ("FRB") voted to broaden the scope of post-employment restrictions applicable to Federal Reserve Bank senior examiners and officers. The FRB explained that its Supervisory Letter applies to the following "covered individuals:" (i) examiners who have served as a "senior examiner" for a depository institution or depository institution holding company for two or more months during the examiner's final twelve months of employment with a Reserve Bank; and (ii) any examiner or Reserve Bank supervision staff who accepts employment with a depository institution or depository institution holding company that he or she examined in the twelve months prior to his or her departure from the Reserve Bank.

The amendment to the FRB's rule on Post-Employment Restrictions for Senior Examiners:

• restricts a covered individual for one year after the individual terminates his or her employment with the Reserve Bank;
• requires the appropriate federal bank regulatory agency to, among other actions, seek an order of removal and industry-wide employment prohibition for up to five years, a civil money penalty of up to $250,000, or both in case of a violation;
• requires Reserve Banks to establish procedures to periodically and regularly review examiners’ duties and promptly notify examiners in writing when a change in duties would cause an examiner to be considered a "senior examiner" or, conversely, cease to be considered a "senior examiner";
• imposes responsibility on examiners for becoming familiar with the rule and ensuring compliance;
• requires Reserve Banks to: (i) maintain electronic records of examiners covered by the rule; and (ii) review the work papers of any examiner, regardless of whether he or she is designated as a "senior examiner," that accepts employment with a depository institution or depository institution holding company that he or she examined in the twelve months prior to his or her departure from Federal Reserve employment; and
• requires Reserve Banks to promptly notify their respective officer-in-charge of supervision, ethics officer and the FRB's designated agency ethics officer of any violations of this rule.

The restriction on former officers will be effective on December 5, 2016, and the revised senior examiner policy will become effective on January 2, 2017. In early 2017, a horizontal review will be conducted by each Reserve Bank’s Quality Assurance function, in partnership with FRB staff, to ensure that Reserve Banks have effectively implemented the new policy.