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What the 116th Congress Can Hold for State Regulators

By John Ryan, CSBS President and CEO

John Ryan, CSBS president and CEO January is not just a good month to set resolutions. The start of the year is the perfect time to reassess priorities. That is particularly true at CSBS as we consider our legislative priorities as the new 116th Congress gets to work. 

Last year, Congress approved the most comprehensive banking bill since the Dodd-Frank Act. It included many provisions we supported, such as a new category of qualified mortgages for small banks, changes to reciprocal deposits, and including state regulators in the development and implementation of the new community bank leverage ratio.

We are actively engaged in how those provisions will be written into regulations. But that does not mean our attention has turned from Capitol Hill. 

State regulators will work with the new Congress as it pursues financial services issues. House control is now with the Democrats. Rep. Maxine Waters, D-Calif., leads the House Financial Services Committee and is expected to focus on consumer protections and housing. Sen. Mike Crapo, R-Idaho, remains chairman of the Senate Committee on Banking, Housing and Urban Affairs and is expected to focus on data security and privacy issues. And, for both committees, fintech will not be far from the front burner.

Meanwhile, CSBS will focus on ways to strengthen our regulatory system of state-chartered banking and supervision. 

First and foremost, there are seats on the FDIC board to fill, and the Senate and Administration should recommend someone who has worked as a state banking regulator. Doing so would fulfill a federal law that has been in place since 1996 and would greatly benefit the financial supervisory system. 

Second, CSBS will seek changes to the Bank Service Company Act to better support state regulators’ ability to oversee their regulated banks and the third-party service providers (TSPs) who partner with those banks.  Current law authorizes federal regulators to examine TSPs but is silent about the authority and role of state regulators. Last year, the House Financial Services Committee unanimously approved a bill developed by CSBS that would amend the BSCA to permit federal and state banking agencies to coordinate examinations of TSPs and share results. We look forward continuing the momentum.

CSBS and state regulators also look forward to working with Congress on fintech and data security.  Our goals in these areas are: to educate Congress about state regulation as a facilitator of innovation, to seek legislative opportunities that support a better networked state-federal approach to fintech, and to oppose legislative efforts to preempt state regulators’ responsibilities as consumer protection and safety and soundness regulators.  

On a day-to-day basis, CSBS and state regulators connect with members of Congress in both parties and both chambers. As in years before, in 2019 we will collaborate on legislative solutions that can strengthen our system of state financial regulation to more effectively oversee state-chartered banks and state-licensed nonbanks. 

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