The Role of State Financial Regulation
State regulators are responsible for chartering, licensing and supervising state-chartered banks and non-bank financial services providers, including mortgage lenders.
They play a critical role in the nation’s economy by ensuring financial services providers operate in a safe and sound manner and effectively serve state and local credit markets.
State regulators supervise over 3/4 of the nation’s banks, and license thousands of non-banks to operate in their state.
Each state has a state banking department that:
- Monitors safety and soundness of chartered institutions
- Ensures that financial institutions are operating within the law
- Protects their communities from illegal and predatory practices
- Promotes local economic growth
What is the Conference of State Bank Supervisors?
CSBS is the national organization for state financial regulators in all 50 states, District of Columbia and U.S. territories.
CSBS gives state supervisors a forum to:
- Coordinate supervision of their regulated entities
- Develop unified legislative and regulatory policies
- Provide training to regulators and staff
What is the value of the dual-banking system?
It is a system by which state and federal regulators collaborate to best supervise banks.
Federal regulators provide a framework to manage systemic banking issues: the FDIC brings insight as an insurer and the Federal Reserve provides a stabilizing force for the U.S. economy.
State regulators are unique among regulators in that their mandate includes safety and soundness, consumer protection and local economic growth. State regulators construct supervision based on their local knowledge, authority and focus.
This broad mandate has laid the groundwork for much financial regulation. Many bank products and services that now seem commonplace — like the checking account, adjustable-rate mortgages (ARMs) and home equity loans — originated in state-chartered banks and matured into the broader dual-banking system
What is the Nationwide Multistate Licensing System?
NMLS is the common platform for state regulation. Through NMLS, mortgage lending, consumer finance and money services companies can obtain multi-state licenses and operate across state lines.
In 2008, Congress mandated mortgage professionals to be licensed and registered through NMLS. At year-end 2016, roughly 30,000 companies and 550,000 individuals were registered in NMLS.
NMLS also allows consumers to obtain critical information about their financial services providers.