US FDIC Proposes Revisions to CSI Rules

In a client update published this week, law firm Davis Polk examines the US Federal Deposit Insurance Corporation’s (FDIC) proposed revisions to its rules governing the disclosure of confidential supervisory information (CSI).

Under the proposal, FDIC-supervised institutions could share CSI without agency approval where “necessary or appropriate for business purposes.” Such disclosure would be permitted in four contexts: within an institution’s corporate group; with outside counsel, auditors, and qualifying service providers; with majority shareholders and incoming senior executives; and in connection with certain merger transactions.

Disclosures within the corporate group would require no confidentiality agreement, matching what the Federal Reserve and the Office of the Comptroller of the Currency (OCC) already permit. Disclosures in the remaining categories would be conditioned on a qualifying confidentiality agreement, and several would go beyond what the FDIC’s peer agencies currently allow without approval.

The service provider category would extend to third-party fintechs and firms that provide technological infrastructure. Meanwhile, institutions could share CSI with incoming senior executives who have received an offer of employment, subject to a confidentiality agreement. And the merger provision would permit a bank to share CSI with a potential counterparty up to three times in any five-year period before a definitive agreement is signed, subject to a confidentiality agreement and a waiver of claims against the FDIC.

The FDIC last updated its CSI regulations in 1995, and the proposal marks the first effort by a federal banking agency to revise such rules under the current administration. The Federal Reserve updated its CSI regulations in 2020, and the OCC last undertook a major overhaul in 1999. Congress has also pressed for reform: Senator Bill Hagerty, a member of the Senate Banking Committee, wrote to the federal banking agencies late last month urging changes to how CSI is handled.