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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.  

Live rich, die poor; never make the mistake of doing it the other way ‘round.”  – Publisher Walter Annenberg

To which we might add, timing is everything, and Facebook founder Mark Zuckerberg appears to have perfect timing.  We aren’t in a position to opine on the rumors about the underwriter of Zuckerberg’s IPO, but he collected his billions, pulled off a surprise wedding and presumably is happily-ever-aftering in some delightful locale.  Rich or poor or in-between, we all live in the here-and-now and hope, if we’re lucky, to make the most of it.

CSBS Announces 2012-2013 Board & Officers

Following the annual meeting of the Conference of State Bank Supervisors (CSBS) held in conjunction with the CSBS State-Federal Supervisory Forum in Savannah, Ga., CSBS announced the new board and officers for 2012-2013.

Newly-installed officers, who comprise the Executive Committee, include:

• Chairman: Tennessee Commissioner of Financial Institutions Greg Gonzales.
• Chairman-Elect: Kentucky Commissioner of Financial Institutions Charles A. Vice.
• Vice Chairman: Arkansas State Bank Commissioner Candace A. Franks.
• Secretary: Massachusetts Commissioner of Banks David J. Cotney.
• Treasurer: Texas Banking Commissioner Charles G. Cooper.
• Immediate Past Chairman: Louisiana Commissioner of Financial Institutions John P. Ducrest.

Commissioners representing the CSBS Districts are:

• District I – Maine Superintendent of the Bureau of Financial Institutions Lloyd P. LaFountain, III.
• District II – Indiana Director of the Department of Financial Institutions David H. Mills.
• District III – Alabama Superintendent of Banks John D. Harrison.
• District IV – South Dakota Director of Banking Bret Afdahl.
• District V – Oregon Administrator of the Division of Finance and Corporate Securities David C. Tatman.

At-large Board Members are:

• New York State Department of Financial Services Superintendent Benjamin Lawsky.
• Utah Department of Financial Institutions Commissioner G. Edward Leary.

Other members of the CSBS Board of Directors include:

• Bankers Advisory Board Co-Chairman: Iowa Superintendent of Banking James M. Schipper.
• CSBS Legislative Committee Chairman: Washington Department of Financial Institutions Director Scott Jarvis.
• CSBS Regulatory Committee Chairman: Maryland Commissioner of Financial Regulation Mark Kaufman.
• Chairman of the Foreign Bank Regulatory Committee: Connecticut Banking Commissioner Howard F. Pitkin.
• Chairman of the State Supervisory Processes Committee: Iowa Bank Bureau Chief Vaughn M. Noring.
• Chairman of the Board of Trustees of the CSBS Education Foundation: Wyoming Department of Audit Director Jeffrey C. Vogel.
• Chairman of the State Regulatory Registry LLC Board of Managers: North Dakota Commissioner of Financial Institutions Robert J. Entringer.
• Chairman of the Federal Financial Institutions Examination Council (FFIEC) State Liaison Committee: Nebraska Director of Banking and Finance John Munn.*
• Bankers Advisory Board Co-Chairman, Banker: Farmers State Bank President and CEO Joseph G. Pierce.*

Chairmen Emeritus, who serve as ex-officio members of the CSBS Board, include:

• Idaho Department of Finance Director Gavin M. Gee.*
• Virginia Commissioner of Financial Institutions E. Joseph Face Jr.*
• Utah Commissioner of the Department of Financial Institutions G. Edward Leary.*
• Oklahoma State Banking Commissioner Mick Thompson.*
• Wyoming Department of Audit Director Jeffrey C. Vogel.*

* denotes non-voting members

New CSBS Chairman Greg Gonzales Says Community Banks Paint a Very American Story

In his key note speech at the CSBS State-Federal Supervisory Forum, newly elected Chairman Greg Gonzales, Commissioner of the Tennessee Department of Financial Institutions, touted the role and value of community banking through the lens of his tour through communities in his state.   “The fact I see over and over is that these banks are clearly and deeply ingrained into the very fabric of these communities,” stated Gonzales.  “For some communities, the banks are the very lifeblood of the towns and cities they serve.”

Gonzales asserted that over the next year CSBS will maintain its central role in both encouraging and maintaining a diverse and competitive banking system and an effective state system of bank supervision and regulation.  “There is no greater goal than the effort to ensure the viability of the community bank model,” said Gonzales. “Community banks are simply too important to the health of our local, state, and national economies to be ignored.”

To ensure the community bank model succeeds, Gonzales also stressed the importance of increased, constructive coordination among state and federal regulators. He said coordination is vital to identifying emerging threats and trends in the financial system and that it fosters opportunities for improved supervision.  “I fear without honest and constructive coordination, the community banks we so heavily rely upon as a nation will fall victim to the recovering economy and the regulatory schemes designed to mitigate risk at our nation’s largest and most complex institutions,” stated Gonzales.

John P. Ducrest, the Immediate Past Chairman of CSBS, also addressed attendees at SFSF.  During his remarks, Ducrest, the Commissioner of the Louisiana Office of Financial Institutions, reflected upon his year as head of the Board and congratulated Gonzales in his new role as chairman.

“Greg has a sure sense of what we want the financial services industry to look like in the future,” Ducrest said.  “It’s not an industry comprised only of a handful of mega-banks, but a flourishing industry characterized by strong community banks operating in all corners of the nation, especially in rural areas that would not have access to financial services if it weren’t for their local community banks.”

The full text of Gonzales’ speech is available here.

Senators Introduce Legislation to Bar Bankers from Serving on Federal Reserve Boards

Sens. Bernie Sanders (I-Vt.) and Barbara Boxer (D-Calif.) introduced legislation Tuesday aimed at barring bankers from serving on the boards of the Federal Reserve's 12 regional banks.

The bill (S. 3219), titled the Federal Reserve Independence Act, is a follow-up on an audit by the Government Accountability Office that cited potential conflicts in having bankers serve on Federal Reserve Bank boards.  The measure would bar Federal Reserve Bank board service or employment for anyone who works for, or invests in, any firm eligible for direct financial assistance from the Federal Reserve, and sharply restrict stock ownership and investments by Federal Reserve Bank employees and board members.  This is not a new issue before Congress.  During the debate on Dodd-Frank, Congress considered proposals to eliminate the role of member institutions in selecting Reserve Bank board members.  Ultimately, Dodd-Frank amended the Federal Reserve Act so that Class A directors (those Directors representing commercial banks regulated by the Reserve Banks) do not vote on the appointment of Reserve Bank presidents.  Additionally, Congressman Barney Frank introduced legislation (H.R. 1512) last year that would remove representatives of the Reserve Banks from the Federal Open Market Committee.

The measure is largely seen as a response to the recent trading loss of JPMorgan Chase & Co., whose chief executive officer, Jamie Dimon, sits on the board of the Federal Reserve Bank of New York.   Because the Federal Reserve Bank of New York also regulates JPMorgan, Senator Sanders said the practice poses dangerous conflicts of interest.  “The people ‘regulating’ the banks are the exact same people who are being regulated. If this is not a clear example of the fox guarding the henhouse I don't know what is,” Sanders said at a news conference.

In a press release issued Thursday by the Kansas City Federal Reserve, Esther George defended the role of bankers serving on Federal Reserve Bank boards, stating that bankers provide valuable information about economic conditions in their communities.  Furthermore, she said that “while all directors are involved in matters regarding Reserve Bank governance and oversight, they play no part in the Fed’s role in supervising and regulating financial institutions.”

Around the States

PA: Consumers interested in strengthening their knowledge about personal finance and investing are invited to take part in the "Money Matter$" conference on May 31 in Erie.  The event is co-hosted by the Pennsylvania Banking Department.  The Department of Banking will host a session entitled "Banking Basics 101," which will focus on recent changes to the banking industry and how these changes can affect consumers' everyday lives.  This session will also address different types of banking accounts and various fees that can be assessed to those accounts. Read more.

TX: Effective June 1, 2012, the Texas Department of Banking is revising its policy regarding the use of branch certificates as part of its continuing efforts to minimize regulatory burden.   As of the effective date, the Department will no longer issue branch certificates of authority and Texas state-chartered banks will no longer be required to display a certificate of authority at each branch. Read more.

Around the Agencies

CFPB: The Consumer Financial Protection Bureau (CFPB) issued an Advance Notice of Proposed Rulemaking this week seeking input on how to ensure that consumers’ funds on prepaid cards are safe and that card terms and fees are transparent.  This is the CFPB’s first step toward adopting consumer protections for the prepaid card market.  “The people who use prepaid cards are, in many instances, the most vulnerable among us,” said CFPB Director Richard Cordray.  “All consumers need, and deserve, products which are safe and whose costs and risks are clear upfront.  Yet right now prepaid cards have far fewer regulatory protections than bank accounts or debit or credit cards.  That’s why we are launching a rulemaking to promote safety and transparency in this emerging market.”  Read more.

CFPB: The CFPB is proposing a rule that would set up procedures to supervise non-banks that may have engaged in activities that pose risks to consumers.  This rule would clarify procedures the CFPB would use when exercising the authority granted to it by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).  Read more

FDIC: Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported an aggregate profit of $35.3 billion in the first quarter of 2012, a $6.6 billion improvement from the $28.8 billion in net income the industry reported in the first quarter of 2011.  This is the 11th consecutive quarter that earnings have registered a year-over-year increase. However, loan balances declined by $56.3 billion (0.8 percent) after three consecutive quarterly increases.  Read more.

FINRA: The Financial Industry Regulatory Authority (FINRA) announced that it has fined Citigroup Global Markets, Inc. $3.5 million for providing inaccurate mortgage performance information, supervisory failures and other violations in connection with subprime residential mortgage-backed securitizations (RMBS).  Read more.

TREASURY: The U.S. Department of the Treasury announced the identification of Belarus-based JSC CredexBank (Credex) as a financial institution of primary money laundering concern. Treasury took this action because it has reason to believe that Credex has engaged in high volumes of transactions that are indicative of money laundering on behalf of shell corporations, and has a history of ownership by shell corporations whose own lack of transparency contributes to considerable uncertainty surrounding Credex’s true beneficial ownership. Read more.

Upcoming Events

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.

June 18-20: The 2012 Examiners Forum will be held in Portland, Oregon and is designed to bring together Senior Certified Examiners and other "seasoned" examiners to discuss current and emerging issues.  Read more.

Closing Comment

“The dual banking system has provided and continues to offer significant benefits to our financial system and the economy. For example, it has allowed local bankers, state supervisors and state governments to construct a banking system closely attuned to the economic needs of each state and supervised by personnel with a strong knowledge of the structure and condition of the local economy.”

– Esther L. George, President and Chief Executive Officer of the Federal Reserve Bank of Kansas City in a speech during the CSBS State-Federal Supervisory Forum in Savannah, Ga.

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

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