Attorneys who do not work in the banking space are often shocked to learn that federal banking regulators use regulations governing confidential supervisory information (CSI) to prevent banks and their officers and directors from consulting with outside counsel and to monitor that communication when it occurs. When a bank, or one of its officers or directors, wants to seek legal advice concerning documents or information that a regulator deems to be “CSI,” banking regulators take the position that this can only be done with prior agency approval. That approval is often delayed or even entirely withheld, which prevents the client from discussing the CSI with counsel, even when the CSI already is in the client’s lawful possession. In addition, even when consent is given, it often is made contingent on counsel telling the regulator what CSI is being shared, which effectively results in the regulator monitoring the documents and topics about which banking clients seek legal advice.
Naturally, this unusual dynamic can drive a wedge between counsel and client. The client may need advice concerning how to respond to a document containing CSI—for example, a regulator’s report of examination setting forth purported violations of law—but cannot openly and freely discuss the contents of the document with counsel. Moreover, the knowledge that seeking legal counsel will require notifying a regulator can discourage a client from seeking legal advice in the first place, due to concern over how the regulator will react to learning that counsel is being sought. Before seeking legal advice from a criminal attorney, for example, the client has to ask, “Do I really want to contact my regulator and announce that I am consulting a criminal attorney concerning this CSI”?
