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CSBS Examiner

A weekly report of events affecting the state banking system from the Conference of State Bank Supervisors


 In This Issue...

 Upcoming Events...

State-Federal Supervisory Forum, Savannah, GA, May 21-23:   The State Federal Supervisory Forum is an annual gathering of senior executives in key leadership positions with state and federal regulatory agencies. Participants will discuss current and emerging policy and operational issues affecting state financial regulation and the state/federal regulatory partnership. The program will include formal presentations on a variety of important topics, open forum Q&A sessions, as well networking opportunities. 

Examiners Forum, Portland, OR, June 18-20:  The 2012 Examiners Forum is designed to bring together Senior Certified Examiners and other "seasoned" examiners to discuss current and emerging issues. 

Senior School, Indianapolis, IN, June 25-29:  Senior School is designed to meet the specific leadership training needs of state financial regulators who are rising into supervisory and/or management positions within their departments, serve as an examiner-in-charge in the field, or currently hold a managerial position within the agency. The behavioral science and management techniques presented are developed and honed each year to apply to the unique and evolving needs of financial regulatory personnel. 

Deputy Seminar, New Orleans, LA, July 30 – August 1:  The Deputy Seminar is an opportunity for key banking department officials to gather to learn about upcoming issues, share challenges, and learn potential solutions. 

 Legal Seminar, New Orleans, LA, August 1-3:  The Legal Seminar provides a forum for state banking department attorneys, assistant attorneys general assigned to the department, and other regulatory attorneys.  

“While Bank of America’s CEO and shareholders meet in Charlotte… the 99% is taking to the streets across the nation to protest BofA … Click below for more details and to RSVP.”

– An email from this week.

While we are not taking a position on the nation’s second-largest bank, we found it interesting that this use of social media to promote a spontaneous demonstration included an RSVP.  How very quaint in this era of flash mobs. The original Woodstock happened via a primordial social medium – word of mouth.  As did the events outside the 1964 Democratic convention.  Today we routinely add our names to various political petitions with just a couple of clicks.  Sometimes we even see good results from those petitions.  But looking back, the primordial social medium somehow seems more potent.

Examiner Q&A with Greg Gonzales: Preview of SFSF Speech

Greg Gonzales, the Commissioner of the Tennessee Department of Financial Institutions, will be elected Chairman of the Conference of State Bank Supervisors (CSBS) May 21 at the CSBS State-Federal Supervisory Forum (SFSF) in Savannah, Georgia.

A native of Baxter, Tennessee, Commissioner Gonzales was sworn in as the 18th commissioner of the Tennessee Department of Financial Institutions (the Department) in January 2007 by Governor Phil Bredesen, and was subsequently reappointed by current Governor Bill Haslam.  Commissioner Gonzales first joined the Department in 1986 and has served in various roles, including general counsel, assistant commissioner, and acting commissioner.  He has an undergraduate degree from Tennessee Technological University and a law degree from the University of Tennessee.

The CSBS Examiner recently caught up with the Commissioner to get a sneak peek of his SFSF address to regulators where he will lay out plans for the year ahead and outline his priorities as CSBS Chairman.

To listen to the Examiner Q&A with Commissioner Gonzales, click here.

Conference of State Bank Supervisors Releases 2011 Annual Report 

CSBS has released its annual report for 2011 which provides a comprehensive summary of organization-wide efforts to support the leadership role of state banking supervisors and lays out principles that will guide the work ahead. 

Highlights of the CSBS 2011 annual report include:

  • The CSBS strategic plan, which was approved by the CSBS Board of Directors in December 2011.
  • CSBS efforts to encourage and maintain a diverse banking system by educating policymakers and federal regulators on the critical role of community banks and the dual-banking system.
  • Expanded multi-state examinations of mortgage originators and servicers, facilitated by the CSBS-AARMR Multi-State Mortgage Committee (MMC).
  • The significant new initiative undertaken by the CSBS Education Foundation to provide low-cost, convenient, and robust training and professional development programs for state officials.
  • The completed registration through the Nationwide Mortgage Licensing System and Registry (NMLS) of more than 375,000 mortgage loan originators and more than 11,000 depository institutions and subsidiaries.
  • The launch of the NMLS Mortgage Call Report, marking the first standardized information collection of quarterly financial and origination data from state-licensed residential mortgage lenders.
  • The expansion of NMLS to be the system of record for state-licensed, non-mortgage, non-depository financial services providers.
  • An electronic copy of the CSBS 2011 annual report is available here

Volcker, Hoenig Offer Alternative Views on Ending “Too Big To Fail”

The Senate Banking Subcommittee on Financial Institutions and Consumer Protection held a hearing May 9 on limiting federal support for large financial institutions.  Three panels of witnesses representing industry, academia, the non-profit sector, and government testified.  Most notably, Paul Volcker, Chair of the President's Economic Recovery Advisory Board and Former Chairman of the Federal Reserve Board of Governors, and Thomas Hoenig, a recently confirmed Director of the Federal Deposit Insurance Corporation (FDIC) board of directors, provided testimony.

During his opening statement, Subcommittee Chairman Sherrod Brown (D-OH) expressed support to end “government policies that support and encourage large complex institutions.”  Senator Brown announced the introduction of his bill, the Safe Banking Act (S. 3048), and said that this legislation is critical to instilling market confidence that “too big to fail” (TBTF) has been permanently eradicated. 

In Volcker’s testimony, he asserted that the proprietary trading rule, or the so-called “Volcker Rule,” is a “solid step toward reining in” banks that are considered TBTF.  Hoenig, on the other hand, offered another alternative to ending TBTF – separating out a commercial bank's higher-risk activities "beyond their core services of loans and deposits" if those activities make the institution so complex that it threatens the market.  Hoenig went on to say that subsidies afforded to systemically important financial firms allowed them to expand high risk activities and take on a greater share of the nation's wealth compared to other industries.

The issue took on greater importance with the announcement late Thursday from J.P. Morgan that it lost $2 billion in trading losses. The pundits spent much of Friday debating the applicability of the Volcker rule.

The full list of panelist, panelist testimony, and a webcast of the subcommittee hearing is available online here.

Gruenberg Outlines FDIC Resolution Strategy for SIFIs

This week Martin Gruenberg, Acting Chairman of the FDIC discussed his agency’s actions and strategy to conduct the orderly resolution of systemically important financial institutions (SIFIs).  Gruenberg, who was speaking before the Federal Reserve Bank of Chicago’s Bank Structure Conference, first detailed actions taken by the FDIC in the past 18 months to carry out systemic resolution responsibilities imposed upon the agency by the Dodd-Frank Act.  Such actions include the establishment of the Office of Complex Financial Institutions, the adoption of a final rule implementing Title II of the Dodd-Frank Act, and adoption of final rules regarding resolution plans, or “living wills.”

Of particular note, however, was Gruenberg’s description of the FDIC’s strategy for actually resolving a SIFI.  According to Gruenberg, the goals of the FDIC’s resolution strategy are to provide financial stability, accountability, and viability.  In the event of a resolution of a SIFI, Gruenberg indicated the FDIC would place the firm’s parent company into receivership and pass its assets to a newly created bridge holding company.  This action would allow the firm’s subsidiaries that are solvent to remain open, which should preserve the franchise value of the firm and mitigate systemic consequences. 

“In summary, what we envision is a resolution strategy under which the FDIC takes control of the failed firm at the parent holding company level and establishes a bridge holding company as an interim step in the conversion of the failed firm into a new well-capitalized private sector entity,” Gruenberg said.  “We believe this strategy holds the best possibility of achieving our key goals of maintaining financial stability, holding investors in the failed firm accountable for the losses of the company, and producing a new, viable private sector company out of the process.”

Read Acting Chairman Gruenberg’s speech in its entirety here.

Around the States

TX:  The Texas Department of Banking and the FDIC are co-hosting a free webinar on May 31st.  The goal of this webinar is to share examples and best practices on ways banks and organizations can educate communities and to become more proactive in financial education issues at the convenience of your office or home.  “We invite participants to join us from financial institutions, government agencies, non-profit organizations, businesses, teachers, students, consumers and community leaders who are committed to or are interested in financial education,” the press release stated.  Participation is free; however registration is required to obtain webinar instructions.  Read more.

Around the Agencies

FINCEN:  The Financial Crimes Enforcement Network (FinCEN) announced it will extend its proposed rule on customer due diligence requirements for financial institutions for an additional 30 days.  FinCEN issued the proposed rule March 5 and received several comments, including several requesting that the agency extend the deadline in order to allow parties more time to comment.  Read more.

FTC:  The Federal Trade Commission (FTC) testified before Congress about the agency’s efforts to protect consumer privacy, including the FTC’s support for implementation of a “Do Not Track” mechanism that would allow consumers to control the tracking of their online activities across websites, and other approaches recommended in its recent privacy report.  Read more.

OCC:  Comptroller of the Currency Thomas J. Curry announced that Paul Nash will succeed John Walsh as Senior Deputy Comptroller and Chief of Staff.  Mr. Walsh has announced that he is retiring this summer. Mr. Nash will join the OCC on May 21st.  He has been the Deputy to the Chairman for External Affairs at the Federal Deposit Insurance Corporation since March 2009.  In that role, he oversaw the agency’s Office of Legislative Affairs, the Office of the Ombudsman, and the Office of Minority and Women Inclusion. Read more.

Around D.C.

FANNIE MAE:  Americans’ attitudes about homeownership, the economy, and personal finances continue to move incrementally in a positive direction, according to results from Fannie Mae’s April 2012 National Housing Survey.  “This month's survey shows a continued gradual improvement in consumer sentiment and outlook for home prices,” said Doug Duncan, vice president and chief economist of Fannie Mae.  Read more.  

NCSL:  State fiscal conditions continue to improve at a slow and steady pace, according to a report released this week by the National Conference of State Legislatures.  The report, State Budget Update: Spring 2012, found revenue performance remains positive and expenditures in most states are stable.  And for the first times since the Great Recession, a number of states are projecting to end the fiscal year with small unobligated balances.  Read more.

Upcoming Events

May 16:  Financial Institutions and Consumer Credit Subcommittee of the House Financial Services Committee will hold a hearing on Dodd-Frank’s Impact on Systemically Important Financial Institutions at 10:00 a.m.  Read more.  

May 16:  Oversight and Investigations Subcommittee of the House Financial Services Committee will hold a hearing on the FDIC’s Structured Transaction Program Oversight at 2:00 pm.  Read more.

May 31:  The National Journal is hosting Compare the Candidates: An Analysis of the Issues Defining the 2012 Presidential Election at the Newseum in Washington, D.C. at 8 am.  The two presidential nominees sharply diverge on key policy issues such as the economy, workplace policy and foreign policy.  The event will examine this clash of policy ideas, each candidate’s vision for America and a broad range of public policy issues destined to define the 2012 general election cycle.  Read more.

Closing Comment

“I'm a strong supporter of Dodd-Frank.  I'm also a strong supporter of small financial institutions because in so many communities that's all they have.  And so as we move forward we have to, I think, dance with sort of a delicate balance here.”

– Congressman David Scott (D-GA), May 9, at a House Financial Services hearing on regulatory compliance costs and their impact on community banks.

Catherine Woody, Editor
Rockhelle Johnson, Writer
Edward Smith, Contributing Editor

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