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Case 1:11-cv-00733-WHP Document 305 Filed 03/23/15 Page 1 of 3

Federal Deposit Insurance Corporation
New York Legal Services Office
350 Fifth Avenue – Suite 1200
New York, New York 10118

Thomas M. Clark
Telephone: (917) 320-2855
Facsimile: (917) 320-2917
E-mail: [email protected]

March 23, 2015

The Honorable William H. Pauley, III
United States District Judge
U. S. District Court for the Southern District of New York
Daniel Patrick Moynihan United States Courthouse
500 Pearl Street
New York, NY 10007-1312

Re: Pennsylvania Public School Employees’ Retirement System v. Bank of America

Corporation, U.S. District Court for the Southern District of New York, Case No.

Dear Judge Pauley:

The Federal Deposit Insurance Corporation (“FDIC”) is a non-party in the above-

captioned action. I write in response to Your Honor’s Order of January 22, 2015 inviting the
bank regulators “to submit a response (including any response to this Order and the procedures
contemplated hereunder.)”

A. The Privilege and the FDIC’s Confidentiality Regulations

The “bank examination privilege” is a qualified litigation privilege that has been created
under common law to protect the confidentiality of bank supervisory information. This unique
privilege is intended to encourage open and candid communication – free from public disclosure
and consumer speculation – between federal banking regulators and the financial institutions
they supervise. Indeed, courts have long recognized the important public policy in support of
protecting bank examination materials from public disclosure. Courts also acknowledge that the
disclosure of bank supervisory records could have a significant adverse impact; not only creating
a “chilling effect” on candid communication between regulators and their supervised entities, but
also breeding public misunderstanding of an examiner’s comments, unduly undermining
confidence in a bank.

Accordingly, courts have broadly construed “confidential supervisory information” when
evaluating whether federal banking agency records are protected from disclosure. In fact, some
courts have relied on both the bank examination privilege and the applicable federal regulations
to protect examination reports and related materials from disclosure.

Case 1:11-cv-00733-WHP Document 305 Filed 03/23/15 Page 2 of 3

Hon. William H. Pauley, III
Case No. 11-CV-00733-WHP
March 23, 2015
Page 2

In a case such as this, where the FDIC is not a party to the underlying litigation, it relies

on its disclosure regulations contained in 12 C.F.R. Part 309, to determine whether it should
authorize disclosure of information protected by the bank examination privilege. Because the
bank examination privilege is notably a qualified one, the FDIC’s disclosure regulations reflect
that fact. As such, the FDIC does not assert the bank examination privilege to shield from
disclosure purely factual, non-supervisory information. Similarly, the FDIC does not invoke the
privilege to protect documents that the bank generated internally for its own business purposes
but frequently furnishes to the regulators.

The FDIC’s regulations establish that reports of examination and related material are
confidential. 12 C.F.R. § 309.5. Specifically, 12 C.F.R. § 309.5(g)(8) provides an exemption
from disclosure for:

Records that are contained in or related to examination, operating, or condition
reports prepared by, or behalf of, or for the use of the FDIC or any agency
responsible for the regulation or supervision of financial institutions.

Additionally, the FDIC’s Part 309 regulations clearly prohibit the disclosure of

information that is exempt under Part 309.5 without prior approval from the agency. 12 C.F. R.
§ 309.6. This additional regulatory provision specifies that protected records (such as bank
examination materials) are the property of the FDIC and exempt from disclosure notwithstanding
that such information may also be within a financial institution’s possession, custody, or control.
12 C.F.R. § 309.6(a). It further states that “under no circumstances” shall anyone “disclose or
make public in any manner” these exempt records “without written authorization” from the
appropriate FDIC official. 12 C.F.R. § 309.6(a). Accordingly, neither financial institutions nor
other third parties may disclose such records without express written authority from the
appropriate FDIC official. While the FDIC has limited discretion to release exempt records
relating to such matters, it will do so where such information is relevant to the litigation, but only
upon a demonstration of good cause justifying disclosure, and where a protective order has been
entered that adequately protects the interests of the FDIC, the depository institution and third
parties. See 12 C.F.R. § 309.6(b)(8)(i).

B. The Documents at Issue

Pursuant to Your Honor’s Order dated January 22, 2015, the parties submitted two
documents to the FDIC for review. These are two among hundreds of FDIC documents the
Bank of America designated as subject to the bank examination privilege. The FDIC authorizes
Bank of America to produce one of these documents – specifically BAC-PPSERS-04-
002722499. The other, PLOG108416, was written by an employee of the FDIC working with
the Comptroller of the Currency (OCC) at the time it was written. The OCC, not the FDIC, is
best suited to address the disclosure decision and claims of privilege relating to that document.

Case 1:11-cv-00733-WHP Document 305 Filed 03/23/15 Page 3 of 3

Hon. William H. Pauley, III
Case No. 11-CV-00733-WHP
March 23, 2015
Page 3

Regarding the hundreds of remaining documents, which the FDIC was not asked to

review, the FDIC joins with the OCC in urging the Court to refrain from compelling the
disclosure of any document Bank of America has designated as subject to the bank examination
privilege until plaintiffs have complied with the FDIC’s administrative process.

Dated: March 23, 2015

Respectfully submitted,
Federal Deposit Insurance Corporation – Legal Division
New York Legal Services Office
350 Fifth Avenue – 12th Floor
New York, New York 10118


s/ Thomas M. Clark

Thomas M. Clark
[email protected]
Telephone: (917) 320-2855
Attorneys for Non-Party Federal Deposit Insurance
Corporation, in its Corporate Capacity

cc: All Counsel of Record (via ECF)