"You miss 100% of the shots you don't take."
- Wayne Gretzky
Statement on FDIC’s Martin Gruenberg
CSBS thanked Martin Gruenberg for his service as chairman of the Federal Deposit Insurance Corp.
Under Gruenberg’s leadership, the FDIC published a definitive study of the structural change and comparative financial performance of community banks. CSBS has advocated for the study’s research definition of community banks as an approach to be used for public policy.
In his address to state and federal regulators at the CSBS State-Federal Supervisory Forum in 2014, Gruenberg called for regular meetings between CSBS leadership, the Chairman and his key staff. As he said in his speech, “I can’t believe we haven’t done this before now.” CSBS’s executive committee has met with the Chairman and his team twice a year ever since.
CSBS President and CEO John Ryan: “Marty Gruenberg made himself accessible to learn more about community banks and state supervision. We appreciate his reaching out to state regulators to hear their concerns and collaborate on important issues. It helps make our state-federal system work to its full potential.”
Primer on Proposed Changes to the Volcker Rule
By Dan Schwartz
Director of Policy Development, CSBS
The Federal Reserve published for comment Wednesday a proposed rule to revise compliance requirements for the Volcker Rule, a provision of the Dodd-Frank Act meant to limit the type of investing and trading a bank can do.
Since implementation of the Volcker Rule in 2013, the complexity of the rule has led to increased compliance costs, as well as caused confusion regarding several of the rule’s exemptions. The proposed changes are designed to simplify, modify, or eliminate requirements that are not necessary to implement the rule while ensuring the safety and soundness of banks.
"The proposal will address some of the uncertainty and complexity that now make it difficult for firms to know how best to comply, and for supervisors to know that they are in compliance,” said Fed Chairman Jerome Powell.
Key Elements of the Volcker Rule Update
The new rule will create three tiers of banks based on their trading assets and liabilities.
- Tier 1 will include banks with consolidated gross trading assets and liabilities over the previous four quarters that exceeds $10 billion
- These banks will need to have a comprehensive compliance program, remaining largely unchanged from the current rule
- There are 18 U.S. banks that meet these criteria
- Tier 2 will include banks with trading assets and liabilities between $1 billion and $10 billion
- These banks will have reduced compliance requirements, such as tailored requirements for underwriting and market-making activities
- There are 22 U.S. banks that meet these criteria
- The 40 U.S. banks in Tier 1 and Tier 2 comprise 98 percent of trading assets and liabilities in the U.S. banking system
- Tier 3 will include all banks with less than $1 billion in trading assets and liabilities
- Banks in Tier 3 would have a “rebuttal presumption,” effectively creating the assumption they are following the rule
The proposed rule would also include several other provisions, such as:
- Simplifying the trading activity information that certain banks must provide to federal agencies
- Updating the definition of a “trading account,” in part by replacing the subjective “intent-based test” with a test based on commonly used accounting standards
- Permitting the purchase or sale of foreign exchange forwards, foreign exchange swaps, and cross-currency swaps for liquidity management purposes
- Allowing banks to establish their own underwriting and market-making risk limits, subject to certain conditions
- Limiting the impact of the rule on foreign activity of foreign banks
The proposed rule will be available for a 60-day comment period, and comments can be submitted via regulations.gov once the proposal is released in the Federal Register in the coming days.
West Virginia Begins Using Uniform Mortgage Test; 58 State Agencies Now Using the Test
CSBS announced today that the West Virginia Division of Financial Institutions began using the National SAFE Mortgage Loan Originator (MLO) Test with Uniform State Content, bringing the total number of state agencies that use the test to 58.
The test combines both the national and state testing requirements of the SAFE Act. Previously, West Virginia licensees had to take two tests: one national and one state. The new test replaces the separate, state-specific tests. A license applicant who passes the National SAFE MLO Test with Uniform State Content will not need to take any additional state-specific tests to hold a license within participating states.
Commissioner Dawn E. Holstein said, “The West Virginia Division of Financial Institutions is committed to commonsense regulation of the financial services industry and protecting West Virginians from financial crime. Professionals can become licensed as loan originators efficiently and affordably through this new streamlined process. We are pleased to offer this path to licensure in West Virginia.”
Louisiana Commissioner and State Regulatory Registry Chair John Ducrest said, “West Virginia’s adoption of the Uniform Standard Test is yet another critical step toward a single national testing standard for mortgage loan originators. State agencies that have adopted the test have witnessed a significant increase in mortgage license applications. This reflects the efficiency the uniform test brings to the licensing process and the expanded opportunity for conducting multi-state business.”
The SAFE Mortgage Licensing Act of 2008 requires all MLOs to be registered or state-licensed through the Nationwide Multistate Licensing System and Registry (NMLS).
More information on the National SAFE MLO test with Uniform State Content is available here.
In Case You Missed It... CSBS Highlights from May
May was a busy month for financial regulation, and state regulators achieved several important goals and milestones:
Elections and Appointments
- State regulators elected Mississippi Commissioner Charlotte Corley to be Chair of CSBS.
- Tennessee's Greg Gonzales and Virginia's Joe Face were appointed to the FFIEC State Liaison Committee, a voting member of the FFIEC that represents states' interests while working with the federal government.
- The Senate approved Jelena McWilliams to lead the FDIC. CSBS endorsed McWilliams earlier this year.
Legislative Progress and Achievements
- CSBS came out in strong opposition to legislation that would prevent states from supervising student loans and protecting students from financial abuse.
- CSBS applauded Congress for passing into law S. 2155, legislation that includes several provisions backed by state regulators.
- Eastern Kentucky University won the 2018 CSBS Community Bank Case Study Competition. In their submission, Eastern Kentucky students interviewed Kentucky Commissioner Charles Vice.
- CSBS announced it will provide the most sweeping cybersecurity training program in state regulators' history.
If you'd like to receive these sorts of updates live, you can subscribe to the CSBS blog, press releases, or the Examiner.