On June 25, the Federal Deposit Insurance Corporation (FDIC) issued a notice of proposed rulemaking that would significantly update and clarify its regulations governing the disclosure of confidential information, including confidential supervisory information. This is the first substantial revision to these rules in approximately 30 years. The proposal would amend 12 CFR Part 309 and add a new Part 306, with changes designed to reduce administrative burden, expand the ability of insured depository institutions (IDIs) to share confidential supervisory information without prior FDIC approval, and modernize and clarify the FDIC’s information disclosure framework. Comments on the proposed rule are due 60 days after publication in the Federal Register.

Key Changes

Expanded Disclosure Flexibility for IDIs

The most significant substantive change is the expansion of circumstances in which IDIs may share FDIC confidential information with third parties without first obtaining FDIC authorization. Under the current rule, IDIs must seek prior FDIC approval before disclosing confidential information to nearly any third party. The proposal would permit IDIs to share such information, for a business purpose and subject to a qualifying confidentiality agreement, with a broader range of parties, including affiliates, legal counsel, majority shareholders, qualifying service providers, and certain potential merger counterparties. This change aligns the FDIC’s approach more closely with the information disclosure regulations of the other federal banking agencies.

Reorganized and Clarified Disclosure Framework

The proposed rule would reorganize Part 309 into four distinct subparts:

  • Subpart A — General provisions, scope, and definitions
  • Subpart B – The FDIC’s Freedom of Information Act (FOIA) policies and procedures, including updated processes for submitting requests, processing timelines, fee provisions, and new supplemental procedures for confidential commercial information
  • Subpart C – The FDIC’s policies and procedures regarding discretionary disclosure of confidential information exempt from FOIA, including the new general authorization framework for IDIs and a clarified “good cause” standard for FDIC-approved disclosures
  • Subpart D — The FDIC’s policies and procedures concerning disclosure of confidential information in connection with legal proceedings in which the FDIC is not a party

The FDIC’s service process regulations that currently appear in Part 309 would be relocated to proposed Part 306.

Our Take

We believe that this proposed rule is beneficial to FDIC-regulated banks and their service providers who are subject to FDIC examinations, in that it provides flexibility to disclose confidential supervisory information for a business purpose in line with the needs of such entities. We suggest that interested banks and service providers should evaluate the rulemaking proposal and respond to the questions contained in it to support the FDIC’s efforts to modernize its treatment of confidential supervisory information.