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Examiner

Ten Ways CSBS Spread Good Cheer in 2019


As we celebrate a close to 2019, CSBS would like to recap some of the highlights of how state regulators brought joy to the financial system in the past year. Below is just a small sampling of the work state regulators have done through CSBS and throughout the country.

The CSBS Examiner will return January 10, 2020.

“You can get excited about the future. The past won’t mind.”
Hillary DePiano, playwright

1 - Provided State Insights to Federal Supervision

The strong partnership state regulators have with their federal counterparts allows for a more efficient and effective supervisory system.

Throughout the year, state regulators commented on several federal regulatory proposals. One highlight of 2019 was the cooperative work between CSBS and the federal financial regulatory agencies to improve the proposed Community Bank Leverage Ratio (CBLR). CSBS presented several concerns with the proposed rule, many of which were considered and addressed during the final rulemaking process. The proposal, discussion, and final rulemaking process all provide an excellent model for how state and federal regulators can work together. Legislatively, CSBS lauded congressional efforts to add state insight to federal supervision through the Bank Service Company Examination Coordination Act.

CSBS also commented on a number of other proposals, including the FDIC's proposed changes to rate restrictions, the Federal Reserve's proposed faster payments system known as FedNow and more.

You can read (and listen) about the work between federal and state regulators below.

State-Federal Regulatory Cooperation Highlights


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2 - Ensured State Representation with Federal Agencies and in Supervision

Every day, state regulators work diligently with their federal counterparts to ensure we have a strong, networked system of supervision. CSBS has tirelessly advocated for state representation in federal agencies to ensure the state position is reflected in federal policy work.. 

CSBS lauded Congress for reconfirming Federal Reserve Governor Miki Bowman, the former Kansas state bank commissioner, for another term on the Board. Bowman fulfills the Federal Reserve's statutory requirement to have a governor with state bank supervisory experience. A similar statutory requirement exists for the FDIC Board of Directors, and CSBS continues to advocate for the White House to appoint and for Congress to confirm a Director with said experience. At the same time, CSBS commended the FDIC for creating the Advisory Committee of State Regulators. 

CSBS has also supported legislative efforts that empower state and federal regulators to work together on key issues. The Bank Service Company Examination Coordination Act and the COUNTER Act are two key examples from 2019.

State Representation Highlights


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3 - Preserved State Consumer Protections

CSBS and the New York State Department of Financial Services (NYDFS) both separately sued the OCC concerning the agency's establishment of a national bank charter for fintech companies. While the CSBS lawsuit was dismissed as not yet ripe for consideration, New York's federal district court took up the NYDFS case and ruled that the OCC was acting beyond its authority in granting a bank charter to companies that do not take deposits. The OCC is expected to appeal the decision.


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4 - Advanced Research on Community Banking

Year after year, state-chartered banks and community banks continue to be a cornerstone of the nation's financial system. State regulators, keenly aware of the impact community banks have on their local economies, advanced research and understanding of community banks through the annual Community Bank Research Conference, the Community Bank National Survey, the student-driven Community Bank Case Study Competition, interviews with community bankers, and through looks at all these in our Data Corner highlights. 

The CSBS Twitter account regularly shares the highlights from this research, as you can see below. We encourage you to follow @CSBSNews.

For more visual learners, the Community Bank Survey results are summarized in the below video, and a summary of community banker interviews is covered in the below podcast.

Other Community Bank Research Highlights


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5 - Launched the Community Bank Sentiment Index

Further leveraging the data and research collected on community banks, CSBS launched the Community Bank Sentiment Index (CBSI). The CBSI is an index derived from quarterly polling of community bankers across the nation. As community bankers answer questions about their outlook on the economy, their answers are analyzed and compiled into a single number. An index reading of 100 indicates a neutral sentiment, while anything above 100 indicates a positive sentiment, and anything below 100 indicates a negative sentiment. 

The 2019 Community Bank Sentiment Index Number for the third quarter is 121, representing a significantly positive economic sentiment by community bankers, and a one point decline from second quarter. CSBS is currently collecting responses for the fourth quarter 2019 Community Bank Sentiment Index reading. We learned from the Index that 68% of bankers believe business conditions will be the same or better in the coming year, 80% of banks expect the same or better profits and 60% believe they will see an increase in franchise value, and 42% of bankers project higher regulatory burden. 

You can read (or listen to!) more about the CBSI below. Also, be sure to follow the CBSI Twitter Account for updates as the index is published quarterly. 

Other CBSI Highlights

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6 - Realized More Aspects of Vision 2020

As fintechs and other nonbanks modernize financial services, state regulators are modernizing the regulatory system that oversees these companies.

Vision 2020 is a series of initiatives from to modernize state regulation of non-banks, including financial technology firms. State regulators have worked tirelessly to adopt an integrated, 50-state licensing and supervisory system, leveraging technology and smart regulatory policy to transform the interaction between industry, regulators and consumers.

In February 2019, the CSBS Board of Directors reviewed and approved 14 recommendations made by the Fintech Industry Advisory Panel. Since the adoption of these recommendations, CSBS and state regulators have been hard at work making each one a reality. CSBS deployed a one-of-its-kind State Examination System in October, developed a State Regulatory Guidance Portal to streamline review of guidance for the industry, developed a map explaining state exemptions for "Agent of the Payee" licenses, supported the work of states on a multistate licensing agreement for money services businesses (MSB) and requested comments for a model MSB law

Work on Vision 2020 initiatives will continue into the new year and beyond. You can watch, listen, or read more about the work being done by CSBS and state regulators below.

Vision 2020 Highlights


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7 - Deployed First-of-its-kind Nonbank Examination System

In October, CSBS launched a one-of-its-kind State Examination System (SES) to an initial set of state agencies. SES is the only nationwide system connecting agencies and companies in the supervisory process.  State regulators using SES will experience a more uniform, streamlined, and effective examination process when looking at nonbanks, and companies examined using SES will experience a more straightforward process when operating in multiple states. 

More than 30 states have at least some agencies committed to using SES upon launch, and that number only continues to grow. 

The most recent podcast of Simply Stated covers the benefits of SES. You can also learn more on the CSBS Website.


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8 - Laid the Groundwork to Reengineer Nonbank Supervision

In November, CSBS hosted the first ever National Mortgage Policy Summit. The summit brought together policymakers, regulators and the industry to elevate the discussion around mortgage policy on November 13 in Washington, DC. The summit event included keynote presentations and panels representing viewpoints on mortgage policy at the national level. 

CSBS is also producing a white paper known as "Reengineering Nonbank Supervision." The white paper serves as stakeholder awareness documents covering state supervision of the nonbank marketplace, as well as a change document or roadmap to assist state supervisors in identifying the current state of supervision and making informed changes to state supervisory processes. The paper is comprised of several standalone chapters that together will cover the industry supervised by state nonbank financial regulators, the existing system of supervision for nonbanks, and the challenges and opportunities for state supervisors in reengineering that system. 

You can learn more below.

Chapters of "Reengineering Nonbank Supervision"

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9 - Spearheaded the Education, Training and Accreditation of State Regulators

CSBS offers a wide range of in-person and online professional development and training programs and examiner certifications. In 2019, CSBS certified a record number of examiners on cybersecurity examinations. CSBS also awarded several Graduate School of Banking scholarships and recognized three instructors who have done outstanding work enhancing the learning experience of state bank examiners. 

A major achievement of 2019 is that CSBS began accrediting state agencies for the supervision of Money Services Businesses. The new accreditation program sets benchmark standards for a modernized and coordinated system of supervising MSBs, and states that obtain MSB accreditation will be certified they have the resources and implemented processes necessary to ensure MSBs in their state operate safely and soundly, follow BSA/AML standards, and are abiding by state and federal consumer protection laws.

CSBS Education Highlights


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10 - Highlighted the Work of State Agencies

It's impossible to showcase all the incredible work being done by state regulators throughout the year. When the opportunity presents itself, CSBS publishes articles and podcasts showcasing some of that work. 

State Agency Highlights by CSBS


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