Remarks By Gavin Gee
2002-2003 Chairman
Conference of State Bank Supervisors

CSBS Annual Meeting and Conference
Asheville, N.C.
May 29, 2003

Thank you Joe. It is great to be here in North Carolina. Thanks for your hospitality.

The past year has certainly gone very rapidly for me. It seems like only yesterday that I was handed the gavel by my predecessor, Elizabeth McCaul. Back when I was a kid, I was always impatient for the future. I couldn't wait for school, then I, and my teachers, couldn't wait for it to be over. Little did I know that the time would come when I would wish things to slow down.

But my wish has not been granted, so here I am ready to turn the gavel over, which means that it's time to reflect on the past 12 months during my year as chairman of the Conference of State Bank Supervisors.

Of course, it's always a humbling experience to undertake such a mission. But looking in the rear-view mirror, I can report that it?s been a good and productive year.

Our CSBS can take pride in a number of accomplishments. Note that I didn't use the term "successes" because when it comes to politics, one day's success can quickly be revived and transformed into tomorrow's death-threat.

Fortunately, however, we have CSBS as our advocate at the national level. As the only national advocate for the state banking and the dual banking system, we know that CSBS is there, closely monitoring the events that impact what we stand for.

What I am struck with, as I reflect upon our 102-year history, is how much we need each other and how important our CSBS is to us. We are independent but inter-dependent, and we know there's strength in unity.

Despite the fact that our states back home come first, we come together under the CSBS umbrella to ward off threats and protect the principles that brought us together back in 1902.

A complete report on the past year would take all day, but I would like to list a few of our accomplishments at this time, because we need to recognize the work we do on behalf of our constituencies.

From an organizational standpoint, I'm going to categorize things into Membership, Government Relations, Regulatory, Education, International and Communications, starting off with Membership:


Any membership-based group recognizes that membership strength is a barometer of how the organization is doing. I'm very pleased to report that for the second year in a row, our bank membership campaign has grown. This year, to date, more than 1,650 members have paid more than $2.17 million.

Twenty-four commissioners helped lead the effort in their states (up from 21 the year before), and 47 banker volunteers pitched in to give the campaign a local presence. And we're not done yet!

From a Legislative standpoint, we were again successful in forestalling efforts to enact federal exam fees on state-chartered banks. CSBS also came out swinging against the Comptroller of the Currency's proposal to tap the FDIC for the costs of bank supervision.

CSBS testified in opposition to legislation that would prohibit banks from being involved in the real estate business under Gramm-Leach-Bliley. Thirty states currently allow for this authority, and CSBS is working hard to resist the real estate industry's efforts to roll back the clock.

Of course, something I won't forget soon, was having an opportunity to testify before the House Financial Services Subcommittee on Financial Institutions at its hearing on the Regulatory Relief Act of 2003. That bill is still in the works, and it was an honor to represent CSBS at the hearing.

CSBS also held a very successful Legislative Fly-in with great participation from the states in a very difficult budgetary environment. This annual event is so important to our grass-roots effort, as evidenced by the quality of the sit-down meetings with Fed Chairman Alan Greenspan, Treasury Undersecretary Wayne Abernathy, House Financial Services Committee Chairman Michael Oxley and Ranking Member Barney Frank; and hearing from Nebraska Senator Chuck Hagel as our dinner speaker.

On the Regulatory front, CSBS has been extremely active this year with a seemingly endless array of comment letters and face-to-face meetings with the federal regulatory agencies.

Our regulatory as well as our legislative focus is to enhance and protect the value of the state charter and the states? ability to determine charter types available to financial institutions.

For example, CSBS has developed an Internet Banking Three-Tier Model rule/statute designed to help state banking agencies supervise and empower state chartered banks to conduct electronic banking.

CSBS also held a series of invigorating and challenging debates on strengthening the state system for interstate banking. We are a system that depends on cooperation among states and our federal agency counterparts and all of us, through CSBS, need to work together for a cooperative supervisory system that works for the states, federal agencies, and the banks.

We're also involved on an ongoing basis to facilitate interstate trust activities through the Nationwide Trust Agreement and an Interstate Trust application, which allows a multi-state trust institution to file a short form and satisfy filing and notice requirements for virtually every state that allows interstate trust activity.

Among the more important issues that arose this year was a proposal by the Comptroller of the Currency that would eliminate state banking departments' role in examining state-licensed operating subsidiaries of national banks. When all was said and done, CSBS's efforts resulted in a total of 46 states sending comment letters on this issue.

CSBS has also responded to FDIC Chairman Don Powell after he suggested a single rule-writing agency might be one way to streamline the regulatory process. Instead, CSBS feels that was the reason Congress created the FFIEC, while the states are represented on FFIEC, we have suggested that state regulators have a formal seat on FFIEC.

Hardly a week goes by that CSBS isn't actively meeting with the Federal Reserve and the FDIC, as well as other financial regulatory organizations in Washington.

In the area of regulation, the continued coordination on the technology efforts with the FDIC and the Federal Reserve to make sure that we maintain compatible systems is a significant issue that we continue to dedicate time and effort to.

Moving on to education, CSBS has had an outstanding year for education during 2002-2003, with record attendance of more than 1,600 participants in programs conducted by the Education Foundation.

Besides the ongoing schedule of seminars, CSBS successfully launched several new industry programs this past year, including a Bank Directors Seminar. The first one was held in Idaho, proving that, in addition to chocolate and Idaho potatoes being served at CSBS functions, there are advantages to being Chairman. We also added a program on eBanking Risk Management, and numerous WEB-based courses: Our educational programs focus on the regulatory approach "what examiners are interested in and why"? This has been a great value that CSBS and the departments can offer to the industry.

We had a 66 percent increase in participation in Web-based distance learning programs.

We also added some exciting new products for examiners and the industry, including BANKdynamics, the new bank simulation product developed by our friends at Olson Research; an Appraisal Review Course, a joint project with the FFIEC; and Advocacy & Testifying Training.

New projects on the drawing board: include programs on Large & Complex Credit Analysis, a "problem bank institute"; and comprehensive compliance training & certification

I encourage every state to not only participate with your own employees and staff but to recommend to bankers in your state that they participate in many of the fine educational programs.


Through our International department, CSBS continued to work diligently on activities in the international arena last year.

Many of us do not realize the significance of international banking to the state bank system. As of December 31, 2002 state-licensed foreign banks held more than $1.15 trillion in assets, accounting for about 86 percent of all foreign bank assets in the United States.

It is exceedingly important that CSBS continue to provide leadership in the coordination of activities on multi-state international basis and identifying issues unique to state-licensed institutions. CSBS has dedicated a full-time staff person to support that activity because of the significance of international activities to the state banking system. Although it is concentrated in only a few states, the overall impact on state banking is very significant, and it is important that we maintain this positive position with the international banking community.

It is not well known but many of us commissioners have international ties that are significant. For example, in Idaho we have Ireland Bank, a well-known bank which actually does more business in Paris and Moscow thank in Idaho. In the interest of full disclosure, that is Paris and Moscow, Idaho, and Ireland is a family name.

On a more serious note, the CSBS International Division and the International Bankers Advisory Board were active, developing comment letters on proposed regulations under the USA PATRIOT Act and opposing IRS efforts to require banks to report nontaxable interest paid on non-resident aliens deposits.

CSBS increased its brand awareness for International banks, with excellent attendance at International events, including our annual International Dialogue Day with Chairman Greenspan and our first-ever educational program for international bankers, our Foreign Bank Executive Orientation.

We also continued our successful partnership with the Florida International Bankers Association, working on matters of mutual interest in both Washington, DC and Florida.

In the area of communications, CSBS continues to receive compliments on its weekly newsletter, The Examiner, and on its newly redesigned website. I hope you visit the website regularly and have it bookmarked to make it easy to check the daily newsbytes and the current news articles that are featured.

The communications effort also includes a weekly regulatory update to keep all banking departments apprised of regulatory developments and proposed rules. CSBS held more than two dozen conference calls over the past year on hot topics and to provide feedback from all states and educate our members on important trends and developments in Washington.

As they say on NPR's Market Place, now to the numbers:

Each year, we take a snapshot of the year-end numbers to see how state-chartered banks stack up. Here's how we look as of December 31, 2002.

• Total number of state and national banks at year-end 2002 was 7,887. State charters represent 73 percent of the total number of commercial banks.

• Over 41 percent of the nation's 1,566 savings institutions are state-chartered.

• 48 percent of commercial bank assets are held by state-chartered banks.

• 41 of the 100 largest banks ($10 billion+) and are state-chartered.

• Over 70 percent of the nation?s community banks ($1 billion and under) are state-chartered.

So as you can see, state banks are alive and well and well-positioned for the new millennium. They will continue to add significant value to our communities, states and our great nation as they have for over 100 years. And rest assured, CSBS is our biggest and best advocate.

I can't close without saying thanks to the CSBS staff for the terrific job they do and for all their personal help and support to me during this past year. I also want to thank my staff back home who have been running our department. If the truth were known, better when I'm traveling.

Anyway, I'm wanted to give a special mention to our Bankers Advisory Board and International Bankers Advisory Board and say how much we appreciate the many banks that and bank volunteers that support our CSBS.

I would like to take this opportunity to say thank you for the privilege and opportunity of representing this great organization during the past year. I look forward to continued involvement in the activities as CSBS begins its 103rd year of banking leadership.