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The Examiner

"Few things can help an individual more than to place responsibility on him, and to let him know that you trust him."

- Booker T. Washington, American educator, author, and presidential advisor, Born this day in 1856

The Fed's Bowman: A Focus on Communication with State Regulators

During the annual CSBS fly-in, where state regulators visit Washington to meet with their federal counterparts, Federal Reserve Board Governor Michelle Bowman described how she wants to foster better communication between the Federal Reserve and state financial regulators. Bowman, a former Kansas state financial regulator and community banker, was confirmed as Board Governor last fall.

You can read her full remarks here. Below are highlights:

On the U.S. financial regulatory system: "The nature of financial regulation and supervision in the United States argues strongly for better coordination. To a much greater extent than in other nations, in the United States financial oversight is divided between the federal government and...the states. At the federal level, responsibility is further divided between different agencies...This system has evolved over time, and...there are some advantages to specialization. But this division of labor may, at times, inhibit information sharing."

On the benefits of greater coordination: "Better communication and information sharing between state banking commissioners and the Federal Reserve can further improve the early identification and resolution of emerging issues at community banks....[Also,] better communication...leads to better outcomes." 

On federal rule-making: "The community bank leverage ratio (CBLR) an example where it makes good sense to consult closely. I know you have a lot of knowledge and expertise to bring to bear on this issue, which helps explain why Congress has required the agencies to consult with the states....The Fed and the other agencies are now gathering and evaluating feedback on the CBLR...I am committed to re-engaging with you on the interagency proposal and ways we might be able to improve it." 

On community banks: "When community banks are the source for more than half of all lending to small businesses, which together account for two-thirds of private sector job creation, then the health of community banking has a big influence on the health of the U.S. economy....Since the financial crisis, the health of the community-banking sector has improved significantly....[with] sound levels of capital...strong earnings...[and that] no community banks failed in 2018." 

On vibrant communities: "Strong communities are the building blocks of a strong nation. They provide safety, education and economic opportunities, and help define the values we hold dear. Community us save and plan for a better future. The credit they extend helps preserve farming as a way of life for American families, and provides the means for small businesses to start and to thrive, which is so important to the health of communities." 

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Ducrest, Pleger Appointed, Gonzales Reappointed, to FFIEC State Liaison Committee 

The Federal Financial Institutions Examination Council (FFIEC) announced the appointment of two new members of the State Liaison Committee (SLC), John Ducrest and Steve Pleger. Their two-year terms on the SLC begin April 1, 2019 and continue through March 31, 2021. 

John Ducrest

John Ducrest was designated by the American Council of State Savings Supervisors (ACSSS) to serve on the five-member SLC. Ducrest serves as the Commissioner of the Louisiana Office of Financial Institutions (OFI), a position he was first appointed on June 8, 2004, and subsequently reappointed every four years since.

Ducrest has served as Chairman of the Conference of State Bank Supervisors (CSBS) from January 14, 2011, through May 21, 2012, having previously served in several leadership positions with that organization.

Ducrest served on the Financial Stability Oversight Council from March 2012 through September 2016. Additionally, since May 2017 he has served as Chairman of the State Regulatory Registry, a subsidiary of CSBS which owns and operates the Nationwide Multistate Licensing System. 

Ducrest has been with the Office of Financial Institutions for over 33 years. From 1985 to 1994, he was a Financial Examiner. In that role his duties included conducting safety and soundness examinations of financial institutions. In 1994, Ducrest was named Deputy Chief Examiner of OFI. 

Steve Pleger

Steve Pleger was designated by the National Association of State Credit Union Supervisors (NASCUS) to serve on the SLC. Pleger was appointed to the position of Senior Deputy Commissioner for the Georgia Department of Banking and Finance on May 1, 2010.

Within goals and priorities established by the Commissioner, his areas of responsibility include general administration and oversight of the Department; development of policies and regulations; oversight of information technology, security, and project management; and liaison to government agencies (state and federal) as well as various trade groups. 

Prior to his appointment at the Georgia agency, Pleger had responsibility for directing examination programs for large and unique financial institutions and has examination experience that covers holding companies, banks, credit unions, non-depository trust companies, agencies, and third-party service providers. Pleger has five years of industry experience working in community banking. 

Pleger currently serves on the NASCUS board and had previously served as Chairman. 

Greg Gonzales

The Council also announces that the CSBS has reappointed Commissioner of the Tennessee Department of Financial Institutions Greg Gonzales. April 1, 2019 marks the beginning of Gonzales’ second two-year term, which will continue through March 31, 2021. 

Gonzales is the 18th Commissioner of the Tennessee Department of Financial Institutions, serving in this position since 2005. Gonzales is an active member of the SLC since 2016. Gonzales also serves as the SLC Chairman, a position he has been elected to annually since 2017 by the SLC members. 

The current members of the SLC also include Edward Joseph Face, Commissioner of Financial Institutions for the Virginia State Corporation Commission's Bureau of Financial Institutions, confirmed by the Council; and  Tom Fite, Director, Indiana Department of Financial Institutions, confirmed by the Council. 

The FFIEC was created by the Federal Financial Institutions Regulatory and Interest Rate Control Act of 1978 to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions, and to make recommendations to promote uniformity in the supervision of financial institutions. It also conducts schools for examiners employed by the five federal member agencies represented on the FFIEC and makes those schools available to employees of state agencies that supervise financial institutions. 

The FFIEC currently consists of the following six voting members: a member of the Board of Governors of the Federal Reserve System; the Chairman of the Federal Deposit Insurance Corporation; the Director of the Consumer Financial Protection Bureau; the Comptroller of the Currency; the Chairman of the National Credit Union Administration; and the Chairman of the SLC. 

The SLC consists of five representatives of state banking and credit union agencies that supervise financial institutions. Members are designated by the CSBS, ACSSS, NASCUS, and the FFIEC. An SLC member may have his or her two-year term extended by the appointing organization for an additional, two-year term. 

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CFPB Director Kraninger Named FFIEC Chair

CFPB Director Kathleen L. Kraninger was appointed this week to be Chairman of the Federal Financial Institutions Examination Council (FFIEC). Her two-year term runs from April 1, 2019, through March 31, 2021. Chairman Kraninger succeeds Jelena McWilliams, Chairman, Federal Deposit Insurance Corporation. The FFIEC named National Credit Union Administration Board Chairman J. Mark McWatters as its new Vice Chairman for the same two-year term. 

“The FFIEC provides a platform for members of the Council to promote collaboration and consistency in the supervision of financial institutions,” said Director Kraninger. “I look forward to engaging with my colleagues and remain committed to finding effective ways to collaborate on supervisory matters, including the use of appropriate technology. Under my leadership, I plan to focus on building a culture of compliance that prevents consumer harm in the first place,” she said. “This prevention of harm is one of my primary goals, and using all available tools will better protect consumers, taxpayers, and the financial system.” 

Director Kraninger is the second confirmed Director of the CFPB. The U.S. Senate confirmed her as Director on December 6, 2018, for a five-year term. Prior to her confirmation, Director Kraninger served as the Policy Associate Director at the Office of Management and Budget, where she oversaw the budgets for executive branch agencies including the Departments of Commerce, Justice, Homeland Security, Housing and Urban Development, Transportation, and Treasury, as well as 30 other government agencies. 

Director Kraninger graduated magna cum laude from Marquette University and earned a law degree from Georgetown University. She served as a U.S. Peace Corps Volunteer in Ukraine. 

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Video: Community Banks and Technology

Community banks position themselves as early adopters of certain technologies. The video below explains some technologies community banks have adopted.

In the Media

CRA, Small-Dollar Reforms Moving Ahead? Per American Banker: “The heads of the FDIC and OCC expressed hope that bank regulators could agree by early next year on a plan to modernize the Community Reinvestment Act.” The two regulators, FDIC Chairman Jelena McWilliams and Comptroller of the Currency Joseph Otting, spoke to industry groups gathered in Washington this week. The publication also reported that McWilliams sees a path for federal regulators to align on a proposal to encourage more small-dollar lending by banks. Earlier this year, CSBS wrote a comment letter to the FDIC – read it here -- emphasizing the importance of federal agency coordination and the primacy of state laws governing interest rates and other consumer protections. 

Clarifying CECL, Crypto. Want to know how to implement the new accounting standard? See the updated frequently-asked-questions released this week by the Federal Reserve, FDIC, NCUA and OCC, intended to provide guidance to bank examiners and financial institutions. You can read the updated FAQ here. Meanwhile, the SEC “published a framework for analyzing whether a digital asset is offered and sold as an investment contract and, therefore, is a security.” You can read the SEC guidance here.  

FHFA Has a New Director. This week, the Senate confirmed Mark Calabria, former chief economist to Vice President Pence, to become Director of the Federal Housing Finance Agency (FHFA). The agency is charged with regulating Fannie Mae, Freddie Mac and the Federal Home Loan Banks. While the Administration pursues broader reforms to resolve the status and structure of Fannie and Freddie, Politico Pro reported: “There are plenty of smaller steps Calabria could take to shrink Fannie and Freddie’s footprint in the meantime, such as lowering the limit for the maximum size of loans the companies can purchase. The FHFA could also tighten minimum credit requirements, raise the fees Fannie and Freddie charge lenders, and require the companies to limit purchases of certain loans, like cash-out refinancings.”

Cain on the Fed? Axios reported that the Trump Administration intends to nominate Herman Cain, best known as the former CEO of Godfather’s Pizza, to the Federal Reserve Board of Governors. Cain also served in various positions at the Kansas City Federal Reserve Bank. Per The New York Times: “With two open seats on the seven-member Fed, Mr. Trump has the ability to drastically shape the central bank for the foreseeable future. The president has already appointed four of the Fed’s current governors, who carry 14-year terms. On governor, Lael Brainard, is a holdover from the Obama Administration.” 

Extending Bowman at the Fed. Meanwhile, various media outlets reported that the Trump Administration plans to extend the term of Federal Reserve Board Governor Michelle Bowman. Last fall, the Senate confirmed Bowman to fill a Board vacancy that runs from 2018 to 2020. The Administration wants to extend her term to 2034 – filling a normal 14-year term for a Fed governor -- a move that requires Senate approval. 

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