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The Examiner - 2018 Year in Review

"I've become fascinated by the idea that it's really achievable to make two or three small improvements in a week and by the end of the year, it's 150 improvements."

Darrell Hammond


2018 Highlights


In the last year, CSBS has remained at the forefront in representing the work, addressing the needs, and advocating the policy positions of state regulators nationwide.

In 2018, CSBS created engaging digital content, advocated policies to Congress and federal regulators, promoted state efforts in fintech, renewed its lawsuit against the OCC concerning a federal fintech charter, voiced support for several confirmed federal appointees, produced valuable research and analysis, engaged the industry, provided education services and tools to examiners, and so much more.

Below is just a sampling of the work produced by CSBS in 2018.

The CSBS Examiner will be taking a short hiatus through the holidays. The next CSBS Examiner will be available Friday, January 4, 2019.


    Digital Assets

    • CSBS staff produced a helpful summary infographic explaining Vision 2020. Print versions are also available upon request.
    • CSBS released a video showing the impact of state regulation on local communities.

    • CSBS also released a video showing the impact state regulators have on financial technology:

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    Policy Positions

    • Improving State-Federal Coordination: CSBS urged Congress to pass the Bank Services Company Examination Coordination Act, a bill that would improve information sharing between state and federal regulators. The House Financial Services Committee approved the bill 56-0.
    • Simplified Capital Rules to Help Community Banks: At the start of the year, CSBS told federal regulators that proposed changes to simplify regulatory capital rules do not go far enough to help community banks.
    • Opposing De-Risking for MSBs: In congressional testimony, Illinois Secretary Bryan Schneider described how states are taking actions to ensure access to credit and banking services. Secretary Schneider also highlighted the CSBS position that money services businesses do not deserve de-risking.
    • Opposing Preemption on Student Loan Servicing: CSBS publicly opposed Education Department plans to preempt state authority on student loans. The New York Times supported state regulators in their opposition. "The Conference of State Bank Supervisors...shredded the legal arguments behind the preemption idea," the Times wrote. The Treasury also panned Education Department plans to preempt state authority. 
      • CSBS also opposed legislation designed to preempt state authority on student loans, preventing states from curbing financial abuse of student loan servicers. 
    • Support for Community Bank-Driven Economic Growth: CSBS applauded the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155). The law helps community banks foster economic growth by granting qualified mortgage status to loans held in portfolio -- a provision CSBS recommended to Congress -- as well as providing relief on certain appraisals relief the Volcker Rule.
    • Opposing New Breaks for Big Banks: CSBS warned that a proposal by the Federal Reserve and OCC to reduce the enhanced supplementary leverage ratio requirements for large U.S. banks could disrupt the nation's financial stability. 
    • Opposing a New Tax on State-Chartered Banks: CSBS opposed legislation in the House of Representatives that would require state-chartered banks to pay a new fee for supervisory examinations conducted by the Federal Reserve. Congress agreed with CSBS.
    • Supervisory Expectations of Bank Boards: In a comment letter to the Federal Reserve Board, CSBS sought clarification on whether directing supervisory findings to a bank’s senior management instead of the board could limit the board’s ability to provide effective oversight.
    • CFPB Coordination: CSBS commented on the CFPB’s Supervisory Activities. It is one of a series of comment letters CSBS has sent in response to the Bureau’s request for information on all its functions.
    • Appraiser Relief: CSBS issued a Risk Spotlight, highlighting the shortage of appraisers in rural communities. 

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    Fintech and Vision 2020

    • The Original RegTech: CSBS celebrated the 10-year anniversary of the Nationwide Multistate Licensing System. NMLS streamlines the licensing process for nonbanks such as mortgage originators and money services businesses. On the 10th anniversary of NMLS, CSBS President and CEO John Ryan shared thoughts about the next 10 years of state supervision. 
    • Vision 2020 Initiatives
      • Progress Report: CSBS provided an update an array of initiatives via an infographic
      • Industry Input: The Fintech Industry Advisory Panel worked to identify pain points in multistate licensing and supervision. A full report containing specific recommendations is forthcoming.
      • Innovation Contacts: All 50 states and the District of Columbia named Fintech Innovation Contacts, simplifying the process for fintech firms to engage with state regulators.
      • Fintech Forum: The CSBS forum, which served as a mid-point check-in of the CSBS Fintech Industry Advisory Panel, attracted fintechs, consumer groups, bankers, and state regulators. Then-CSBS Chair Albert Forkner and New York Superintendent Maria Vullo provided thoughts on financial innovation and the states' role in fintech supervision.
      • Streamlined Mortgage Licensing: State regulators nationwide adopted a single, common exam to assess mortgage loan originators (MLOs), simplifying the licensing process for MLOs and streamlining supervision of the mortgage industry.
      • "Networked Supervision" of Cryptocurrencies: CSBS President and CEO John Ryan shared methods for more efficient supervision of cryptocurrency companies. 
    • Vision 2020 Progress Update: Take a look at this helpful infographic describing progress on Vision 2020.

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    The OCC's Preemption of State Regulatory Authority

    • Renewed Litigation: The CSBS Board of Directors approved renewed litigation against the Comptroller of the Currency. The complaint seeks to prevent the agency from moving forward with an unlawful attempt to create a national bank charter for nonbanks that will harm markets, innovation and consumers. "Common sense and the law tell us that a nonbank is not a bank," said CSBS' Ryan. 
    • "A regulatory trainwreck in the making:" CSBS highlighted how the OCC's move exceeds its authority as granted by Congress. "Let us not forget that the last time the OCC pre-empted state consumer protection laws in a sweeping manner -- in the early 2000s -- predatory lenders were let off the hook and contributed to the largest number of home foreclosures since the Great Depression," said CSBS' Ryan.
    • Skepticism Among Analysts: Caution and skepticism are in order as the OCC looks to fit fintechs into the definition and standards of bank-level regulations and supervision.

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    Federal Appointments

    • State Representation at the Federal Reserve: CSBS supported (and Congress confirmed) former Kansas Banking Commissioner Miki Bowman to the Federal Reserve Board. Having a Fed governor with community lending supervisory and industry experience -- a provision that CSBS convinced Congress to make federal law -- will contribute to policy decisions that reflect a more well-rounded view of the financial system.
    • Also at the Fed: CSBS lauded former Fed Chair Janet Yellen for helping to stabilize the U.S. economy, strengthen the financial system, and make community banks a more vital part of financial services. CSBS also expressed confidence in the new Chairman Jay Powell, highlighting his appreciation for community banks.
    • A State Voice on Financial Stability: Texas Banking Commissioner Charles G. Cooper was appointed by state regulators to serve on the Financial Stability Oversight Council. 
    • Changes at the FDIC: The White House nominated and Congress confirmed CSBS-supported candidate Jelena McWilliams to the FDIC Board. CSBS thanked then-FDIC Chair Marty Gruenberg for his service and work with state regulators. 
    • Pushing for State Representation at the FDIC: The current open FDIC director seat should be filled by someone who has served in state government as a supervisor of state-chartered banks, as required by Congress.
    • Thanking Previous Board Members: CSBS thanked FDIC Vice Chairman Tom Hoenig for his service. “Tom Hoenig has been the nation’s thought leader on systemic risk in the banking system," said CSBS President and CEO John Ryan.
    • A New CFPB Director: CSBS expressed eagerness to begin work with newly-appointed CFPB Director Kathleen Kraninger. 

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    Research and Analysis

    • Community Bank Research Conference: In October, CSBS, the Federal Reserve, and FDIC held the sixth annual Community Bank Research Conference in St. Louis. 
      • Community Bank Survey: Over 500 banks responded to the annual community bank survey. Among the findings: community bankers are all-in on technology, and data indicate that compliance costs at community banks declined for the first time in survey history.
      • New Community Bank Sentiment Index: A new research paper examines the findings of the CSBS-Federal Reserve annual survey of community banks, looking at how responses to the survey translate into sentiment of community bankers. 
      • Cost-Savings Benefits of Relief: Regulatory relief targeting the smallest community banks could have the greatest cost-savings benefit, according to a recent report from the Federal Reserve Bank.
      • Publications Pick up Research Survey:  Several news publications and policymakers cite last year's results of the CSBS.
    • Case Study Competition: Fifty-one student teams from 45 colleges and universities across the United States participated in the 2018 Community Bank Case Study Competition. Eastern Kentucky University won the 2018 competition. You can read the Case Study Competition journal here. The 2018 Case Study Competition has already broken a record for number of registrants, with 96 student teams from 64 universities expressing interest. Students will focus on a new regulatory relief law and its impact on community banks. 
    • A Growing MSB Industry: NMLS reported that Money Services Businesses are now a trillion dollar industry.
    • Data Corner, Maps, and Blog Posts:
      • Distribution of Bank Branches: This animated map shows the distribution of the top 10 banks branch locations (ranked by assets) versus all of the other banks in the system from 1994 through 2018.
      • The Impact of Bank Failures: Research shows financial stress at small banks has a different impact on the economy than financial stress at larger banks.
      • Bank Size and Technology Offerings: The larger the community bank, the greater importance of new and emerging technologies, finds a recent analysis.
        • Bank Size Tool: CSBS provides a helpful tool for looking at the composition of the nation's banks by asset category.
      • Outsized Impact on the Economy: Community banks provide 65 percent of all agriculture lending and 42 percent of all small loans to businesses in the nation, but make up only 6.7 percent of the banking system's assets, according to the latest from Data Corner.

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    Engagement with Federal Regulators

    • SFSF: State and federal financial regulators shared challenges and solutions at the CSBS State-Federal Supervisory Forum.
    • Information Sharing: CSBS agreed to share all non-confidential licensing information from NMLS with the Federal Trade Commission. The FTC joins several other federal agencies in this regard.
    • FFIEC: State regulators are represented on the Federal Financial Institutions Examination Council (FFIEC) through the State Liaison Committee (SLC). The FFIEC took several actions in 2018:
      • Encourage further streamlining of the Call Report. In March, the federal banking agencies finalized revisions to the streamlined Call Report. 
      • Issued new Customer Due Diligence and Beneficial Ownership examination procedures. 
      • Promoted awareness of potential changes to LIBOR and efforts to develop an alternative reference rate. 
      • Updated their work on enabling examiners of community financial institutions to operate more effectively, particularly through greater use of technology.

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    Engagement with the Industry

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    Education, Accreditation, and Tools for State Regulators

    • Capital Markets Classes: CSBS began offering a course designed to enhance examiner knowledge of capital markets and improve examination skills.
    • Cybersecurity Training: CSBS also began offering the most sweeping cybersecurity training program in state regulatory history.
    • Bank Accreditation: South Carolina received CSBS Bank Accreditation for the first time. This accreditation demonstrates the commitment of South Carolina and Commissioner Davis to leadership and excellence in bank supervision.
    • Mortgage Accreditation: Arizona and Alabama both received mortgage accreditation, increasing the number of states with CSBS/AARMR Mortgage Accreditation to 26. 

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    Consumer Protection

    • States Step Up: In American Banker, CSBS Chair Charlotte Corley describes a multiyear effort to close down a rogue payday lender. 
    • Opposing Legislation Preempting State Authority: CSBS opposed legislation designed to preempt state authority on student loans, preventing states from curbing financial abuse of student loan servicers. 
    • Consumer Access Portal: NMLS continued operation of the NMLS Consumer Access Portal, a tool to check on the license status of your mortgage company, mortgage loan originator, and other non-bank services.

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