Pryor Cashman Files Amicus Brief in Builders Bank v. FDIC on Behalf of the New York League of Independent Bankers ("NYLIB")

NEW YORK, Sept. 12, 2017 /PRNewswire/ -- On September 11, 2017, Pryor Cashman requested leave from an Illinois federal court to file an amicus brief on behalf of the New York League of Independent Bankers ("NYLIB"), a not-for-profit organization devoted to fostering the prosperity of banks in the greater New York metropolitan area. 

The case, Builders Bank v. FDIC, involves a novel question of law – whether the federal financial regulatory agencies' so-called "CAMELS" ratings, which assess financial institutions' capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk, are reviewable by the federal courts.  

The litigation arose after Builders Bank received a composite CAMELS rating of "4" from the FDIC – a rating that indicated, among other things, that Builders Bank exhibited "unsafe and unsound" practices or conditions, and led to its being assessed with significantly higher FDIC deposit insurance premiums.

After being informed that it could not avail itself of the FDIC's intra-agency appeals process to review its poor composite rating, Builders Bank filed suit in federal court seeking a reversal of the rating and a refund of its excess deposit insurance premiums. Builders Bank's contention is that its "4" composite rating is arbitrary or capricious in violation of the Administrative Procedure Act ("APA").

In response, the FDIC filed a motion to dismiss Builder Bank's suit on the grounds that a CAMELS rating is not a "final" agency action subject to review under the APA unless a financial institution first obtains review of the rating through the intra-agency appeals process. The motion to dismiss also contends that even if an institution does prosecute 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, the Co-Chair of Pryor Cashman's Financial Institution Group, explains:

Pryor Cashman is proud to serve as pro bono counsel to NYLIB on its amicus brief, which provides an industry perspective on a novel legal topic that is of vital importance to financial institutions that are supervised and examined by the federal financial regulatory agencies. 

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. 

Mr. Raice and Dustin N. Nofziger, an associate in the Financial Institutions Group, authored the amicus brief. Associate Ryan Gersovitz also provided assistance on the brief. Carrie Hall of Taft Stettinius & Hollister LLP is local counsel to NYLIB on a pro bono basis.

SOURCE Pryor Cashman LLP

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