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The Examiner

Knowledge will forever govern ignorance; and a people who mean to be their own governors must arm themselves with the power which knowledge gives.

- James Madison
Born this day in 1751

State Regulators Applaud Passage of S. 2155

State financial regulators support the passage of S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, bipartisan legislation that will provide greatly needed relief for community banks.


  • Qualified mortgage status will encourage community banks to lend more to prospective homebuyers;
  • Appraisal relief will help rural Americans in the homebuying process;
  • Reciprocal deposits will be treated as a stable source of funding that keeps large deposits local; and
  • Volcker rule relief will allow community banks to legitimately hedge risk.

On March 12, CSBS wrote a letter to Chairman Crapo supporting S. 2155 and urging its quick passage. The full text of the letter is below.

CSBS Supports Legislation Providing Relief for Community Banks

Dear Chairman Crapo:

On behalf of the Conference of State Bank Supervisors (CSBS), I am writing in support of S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act legislation that will provide greatly needed relief for community banks. We appreciate the leadership of you and other members of the Senate Banking Committee on this issue.

About CSBS

CSBS is the nationwide organization of banking regulators from all 50 states, American Samoa, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands. The mission of CSBS is to support the leadership role of state banking supervisors in advancing the state banking system, ensuring safety and soundness, promoting economic growth and consumer protection, and fostering innovative state regulation of the financial services industry.

State regulators charter and supervise 78 percent of all banks in the United States. In addition, state regulators license and supervise a variety of non-depository financial services. CSBS, on behalf of state regulators, also operates the Nationwide Multistate Licensing System to license and register those engaged in mortgage, money transmission, consumer finance, debt collection, and other non-depository financial services industries.

Community Bank Relief

Community banks are essential to the U.S. financial system and economy. The defining characteristic of a community bank is its relationship-lending business model – one that relies on the bank’s knowledge of its local market, citizens and economic conditions. Relationship lending and community banking are critical to local economic development. For example, community banks account for only 13 percent of the banking industry’s assets but provide 43 percent of all small loans to farms and businesses, thus playing an outsized role in lending to America’s small businesses.
Community banks have been weighed down by the cumulative effect of post-crisis regulatory reforms, which inadvertently prevent them from delivering innovative and flexible services and products to their customers. S. 2155 would help correct this imbalance and provide meaningful relief to community banks.

CSBS thanks Chairman Crapo for including two key provisions very important to state regulators:

Capital Simplification

The legislation requires federal banking regulators to establish a “community bank leverage ratio,” defined as a tangible leverage ratio between 8 percent and 10 percent. Qualifying community banks – those with less than $10 billion in total consolidated assets that have not been disqualified based on their risk profile – will meet the “community bank leverage ratio” in lieu of the current minimum leverage and risk-based capital requirements.

We thank Chairman Crapo for requiring federal banking regulators to consult and notify state regulators during this process. State regulators charter and supervise 78 percent of U.S. banks, and it is vital that we are integrated into the capital simplification process.

Transitional Licensing

The legislation provides 120-day temporary authority to operate as a state-licensed mortgage loan originator for individuals who are: 1) a registered loan originator who becomes employed by a state-licensed mortgage company, or 2) a state-licensed loan originator who becomes employed by a state-licensed mortgage company in a different state.

We praise the bipartisanship behind including language that expands liability protection to state regulators who will be responsible for oversight of these new transitional mortgage loan originators.

State regulators would like to highlight just a few additional provisions of S. 2155 that would help community banks foster economic growth:

Mortgage Lending

The legislation provides qualified mortgage status for loans held in portfolio by banks with assets of $10 billion or less, which will encourage community banks to lend more to prospective homebuyers. State regulators developed this concept several years ago and have long advocated for this provision. When a community bank makes a mortgage and holds that loan in portfolio, the interests of the bank and the borrower are inherently aligned, and lenders retain 100 percent of the risk of default. As such, lenders that retain the full risk of a borrower’s default should be presumed to have made a good-faith effort of determining repayment ability.

Appraisal Relief

The legislation exempts mortgages of $400,000 or less in rural areas from appraisal requirements if the originator is unable to find a state certified or state licensed appraiser to perform an appraisal after a good faith effort to do so. State regulators support this provision.
State supervisors continue to observe the delays that a lack of credentialed appraisers impose on the home purchase process, particularly in rural and underserved markets. Several factors influence the ongoing shortage, including: appraisal regulation thresholds, educational requirements for licensed and certified appraisers, and a lack of clarity regarding options for relief.  This provision will help rural Americans in the homebuying process.

Reciprocal Deposits

Both community banks and their communities benefit from reciprocal deposit networks that allow local financial institutions to maintain relationships with large depositors in their markets. The proposed changes in S. 2155 appropriately recognize reciprocal deposits as a stable source of deposit funding.

Volcker Relief

The legislation exempts banks with assets of $10 billion or less from the Volcker rule. State regulators support this provision. Even though most community banks do not engage in proprietary trading, the Volcker rule may limit their ability to legitimately hedge risk.


State regulators support S. 2155 and urge its quick passage. The bill provides needed relief for community banks and includes a number of provisions that will help state regulators better supervise both banks and non-banks.

Thank you for leadership on this issue and your engagement with state regulators throughout the legislative process.


John Ryan
President and CEO

California Finalizes Settlement in Broader Crackdown on Lender Avoidance of Small-Dollar Loan Interest Rate Limits

The California Department of Business Oversight (DBO) finalized a settlement with Advance America’s California subsidiary that continues a broader DBO crackdown on lender avoidance of interest rate limits on small-dollar consumer loans.

“California consumers deserve a zero-tolerance policy when it comes to lender practices that cause borrowers to pay higher interest rates than they should under state law,” said DBO Commissioner Jan Lynn Owen.  “We will remain aggressive in finding and penalizing such conduct, and making consumers whole.”

The $160,000 settlement requires the subsidiary – Advance America, Cash Advance Centers of California, LLC (AA LLC) – to refund $82,000 to 519 borrowers and pay an administrative penalty of $78,000.

States Commend Students Competing in the Community Bank Case Study Competition

54 student teams from 47 colleges and universities around the U.S. are currently participating in the 2018 Community Bank Case Study Competition, and several state regulators have expressed public support for their local teams.


Pennsylvania Secretary of Banking and Securities Robin L. Wiessmann today commended students from 12 Pennsylvania colleges and universities who will be competing.

“As the financial services sector of our economy evolves because of changing consumer demands and technological innovation, the need to engage the rising generation’s interest in working in finance has become paramount,” said Wiessmann. “Last year, four Pennsylvania schools entered this competition. I am excited to see the large increase of Pennsylvania colleges and universities choosing to compete on a national stage, as well as the number of state-chartered banks participating. We are cheering them on as they compete for this year’s prize.”


Mississippi Commissioner of Banking and Consumer Finance Charlotte N. Corley commended students from Mississippi State University who will be competing.

“Encouraging universities and students to participate in the Case Study competition is two-fold. One – it gives students the opportunity to compete for scholarship money and recognition. Two – it enlightens students on various aspects of the banking industry and encourages them to pursue careers in banking or bank regulation,” said Corley. “I am pleased Mississippi State University saw value in the competition and chose to participate for the second year in a row.”