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The Examiner

There can be nothing in the world more beautiful than the Yosemite, the groves of the giant sequoias and redwoods, the Canyon of the Colorado, the Canyon of the Yellowstone, the Three Tetons; and our people should see to it that they are preserved for their children and their children's children forever, with their majestic beauty all unmarred.

- Teddy Roosevelt
Yosemite National Park was founded this day in 1872


In This Issue...


Banks, Innovation and the Vendor Challenge

By Michael L. Stevens
CSBS Senior Executive Vice President

The expanding world of technology has meant a new test for community banks - vendor management. And they are rising to the challenge, according to analysis of our most recent community bank case study competition.

Most banks are being forced to adopt technology solutions to improve operational efficiency and meet customer expectations, but it is not feasible for community banks to develop all of these solutions on their own. Fortunately, a competitive and creative marketplace provides ample solutions, the case studies show.

Banks have always relied on vendors to address specific needs. The explosion of technology solutions has increased this reliance enormously. One case study cited 22 critical vendors. Another bank was managing 56 different projects as it upgraded its technology.

CSBS has sponsored the competition for four years, asking undergraduate students to partner with a community bank to explore a key issue. The 2018 case study competition focused on banks use of technology, with a record 51 participating teams from 45 academic institutions in 24 states.

The cases provide valuable insights into how banks are viewing technology in their operations, customer service and retention, new products and disaster recovery. As you would expect, there is a full range from excitement and renewal to frustration and anxiety. But make no mistake, community banks are all in when it comes to technology.

Third party risk assessment is now a focal point for upper management at community banks across the country. The most critical risk facing the industry today is cybersecurity. Banks are having to increase their expertise and knowledge of cybersecurity. That risk only increases with more vendors. In fact, one bank stated that better security over functionality can be the driver in vendor selection.

The best advice we picked up from the case studies is for the bank’s leaders to have a genuine desire to learn about new technologies. Developing technology solutions needs to be more than cobbling together a mix of solutions. Banks need to really engage with companies offering solutions to understand what works best with existing technologies and the firms most compatible with the bank.

Banks shared how they get involved with user groups and advisory panels to stay close to the vendor and have a say over future changes. One bank coined the term “coopertition,” a blend between cooperation and competition. This allows the bank to learn from others and perhaps team up to negotiate a better deal.

Vendor management is a challenge for banks as technology solutions grow and constantly change. However, the case studies demonstrate that community banks are doing what they have always done: rising to the challenge, adapting and moving forward.

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An All-New CSBS Podcast - Episode 01 - The States and Fintech

In our first podcast, we interview CSBS President and CEO John Ryan about a major development in fintech supervision spearheaded by state regulators.

Stop me if this setting sounds familiar. A clean, softly-lit conference room is set up with the tables in a square. A light breakfast platter and a large coffee carafe sit out on the credenza. Pleasantries are exchanged along with business cards, as everyone gets settled you can hear the slight muffle of a dial-in line.

All in all, a pretty ordinary business meeting setting. But this meeting was anything but ordinary. For one, the guests weren’t your ordinary guests: On one side of the table sat reporters from some of the nation’s biggest financial news outlets (Politico, Bloomberg, Reuters, Forbes). On another side were representatives from some of the biggest non-bank financial companies in the world (We’re talking the Paypal, Western Union, SoFi). And filling out the rest of the room were these companies’ regulators who, and this might surprise you, are in fact not from Washington but from state agencies all over the country (Georgia and Nebraska were both proudly represented in the room).

And, most un-ordinary of all, the regulators and regulated had come together to share a list of recommendations and initiatives that, once implemented, could change the future of non-bank finance and supervision for the decades to come.

Today we explore ways states work together to handle the behemoth task of supervising America’s diverse financial system, how those same regulators try to engage with the regulated in a balanced, fair way and how those changes can lead to something bigger.

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Education Foundation Recognizes Technical School Instructors

By Kim Chancy 
Program Manager, CSBS Education Foundation 

The CSBS Education Foundation is recognizing three instructors who have done outstanding work enhancing the learning experience of state bank examiners. 

For their work on the 2018 Bank Analysis School, Maisah Ali (California) and Adam Digmann (Iowa) received Special Recognition. Amy Richardson (Vermont) was named Instructor of the Year for her participation as an instructor for the Introductory BSA/AML Examiner School.

The Education Foundation offers technical schools focusing on a variety of topics and skills necessary for examiners. These programs, which focus on the fundamental principles of each topic, last approximately 4 ½ days. The instructors, state regulators approved by their agencies to teach, act as a Subject Matter Expert and assists in developing the material as well as instructing. 

To recognize the hard work and commitment of instructors, the Education Foundation established the Instructor Recognition Program. This program is designed to recognize instructor involvement and hard work, as their contributions are essential to the overall success of the CSBS courses. All instructors receive a letter of recognition. In addition, two special categories have been created – “Special Recognition” and “Instructor of the Year.”  These categories may or may not be awarded each year.

To receive Special Recognition, an individual must have demonstrated course innovation that vastly improves the learning experience, outstanding instructor performance, and/or significant contribution above normal expectations.  

To receive Instructor of the Year, an instructor must have received exceptional ratings and/or comments in course evaluations, outperformed their peers regarding content development and delivery, and met the same criteria for “Special Recognition.”   

We want to thank Maisah, Adam and Amy for their hard work and dedication as well as all technical school instructors for their hard work and commitment to improving the training programs for state examiners and to strengthening the state financial regulatory system.  

For more information on becoming an instructor or any technical schools, please contact Kim Chancy (kchancy@csbs.org).  

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2018 Community Bank Research Conference Highlights - Now in Video!

A reel capturing some of the many highlights from the 2018 conference is now available on the conference website as well as on the conference's YouTube channel.

To view an individual presentation, speech or panel discussion, select the respective links from within the 2018 conference agenda.

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In the Media

Credit reporting system is broken – Rep. Maxine Waters, House Financial Services Committee chair, and Rep. Patrick McHenry, ranking member, questioned the CEOs of Equifax, Experian and TransUnion at a widely reported hearing this week. Politico Pro quoted Waters saying, "To credit reporting bureaus, consumers aren't consumers. They are commodities." McHenry called the three reporting bureaus an “oligopoly.”

GAO warns OCC on regulatory captureAmerican Banker and Politico Pro covered a GAO report that urges the OCC to increase its defenses against regulatory capture. The report suggests that the agency require “documentation of communications between OCC examiners and banks that inform decisions” and to “implement a policy to verify that examiners assigned to a team do not have active conflicts of interest,” among other items. Read the full GAO report here.

Who will regulate BB&T-SunTrust – The American Banker reports that “Among the many still-unanswered questions about the proposed merger between BB&T and SunTrust Banks is which primary regulator will oversee the combined $442 billion-asset institution.” The article goes on to examine each of the three federal agencies — the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency — and continuing in the state system.

Calabria clears Senate Banking Committee – The Senate Banking Committee’s vote to advance Mark Calabria’s nomination to director of the Federal Housing Finance Agency, which regulates the mortgage-finance giants Fannie Mae and Freddie Mac. From the Wall Street Journal: “A libertarian economist and senior aide to Vice President Mike Pence, Mr. Calabria told lawmakers earlier this month that he would work to preserve the popular 30-year, fixed-rate mortgage—a product he has criticized in the past—that currently accounts for approximately 90% of new home loans. If confirmed, Mr. Calabria would play a key role in shaping the Trump administration’s efforts to end the decadelong conservatorship of Fannie and Freddie, taken over at the height of the financial crisis in 2008.”

The FHFA also issued a final rule for GSEs to move to a common mortgage-backed security, beginning in June 2019. Read more here.

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