On October 6, the CSBS released a summary of research presented and discussions had at the third annual Community Banking Research and Policy Conference, held September 30 through October 1. At the conference, community bankers, academics, and federal and state policymakers discussed trends in community banking, with a particular focus on small business and farm lending, community bank performance, and community banks pre- and post-financial crisis. 27 state regulators attended the conference and held a roundtable to address first-hand the challenges – such as increased regulatory burden and evolving technology – and opportunities community bankers face.
On October 14, the Illinois Division of Banking announced that it would host two Cyber Risk and Security Conferences on November 9 and November 16. With the growing number of threats to financial data systems, cyber and data security has become a top concern for regulators in the financial industry. Topics to be addressed at the conferences include: (i) current cyber threats; (ii) bank and credit unions’ cyber preparedness and response to threats; and (iii) existing trends and the globalization of cyber crimes. The CSBS will co-host the conferences.
CSBS’ Multi-State Mortgage Committee: Mortgage Companies Must Comply with Technology-Based Examination Process
On September 29, the Conference of State Bank Supervisors (CSBS) and the Multi-state Mortgage Committee (MMC) released a bulletin titled, “Supervisory Expectations Regarding the Use of Electronic Examination Tools.” The bulletin explains the MMC’s use of electronic examination tools and the supervisory expectations for mortgage companies undergoing the state examination process. As a result of a 2008 initiative by the MMC, state regulators have been using technology to review loan transaction data for years, originally setting the expectation that companies fully participate with the process by 2011. According to the bulletin, however, “the mortgage industry has regularly failed to provide clean data in a format acceptable to the regulators’ technology platform.” As a result of this non-compliance, the MMC recommended that, going forward, state regulators take enforcement action against companies that are unable to provide accurate data in a timely fashion, so as to ensure a “more efficient and timely regulatory process.”
On September 15, the Conference of State Bank Supervisors (CSBS) issued its Model Regulatory Framework for State Regulation of Certain Virtual Currency Activities (Model Framework). The CSBS Emerging Payments Task Force developed the Model Framework to assist states in licensing and regulating virtual currency activities. The Model Framework includes key components to a regulatory scheme that the CSBS hopes will protect consumers and the larger marketplace while facilitating innovation. It also defines virtual currency and describes specifically covered virtual currency activities, such as those involving third-party controls of virtual currency. Additionally, the Model Framework provides flexibility in denominating permissible investments, tailoring cybersecurity audits to a company’s business model, and includes an addition to the BSA/AML Compliance section that recommends that states require verification of an entity’s service users and account holders. The Model Framework also includes a supervision component that requires the establishment of policies and procedures that protect customer access to funds in the event of an institutional failure.
The Model Regulatory Framework for State Regulation of Certain Virtual Activities can be seen here.
CSBS Announcement: Arizona Department of Financial Institutions Becomes Latest State Agency to Adopt National SAFE MLO Test
On July 29, the Conference of State Bank Supervisors (CSBS) announced that the Arizona Department of Financial Institutions began using the National SAFE Mortgage Loan Originator (MLO) Test, making it the 47th state banking agency to adopt the SAFE MLO Test containing Uniform State Content. Combining both the national and state testing requirements of the SAFE Act and the CSBS/AARMR model state law, the test with Uniform State Content was first made available to state banking agencies on April 1, 2013 to help streamline the application process for MLOs seeking to obtain licensure in more than one state. Since April 1, 2013, according to the CSBS, over 58,000 MLOs have taken the National SAFE MLO Test with Uniform State Content. Notably, applicants who take the test on or after October 3, 2015, will be expected to understand requirements of the TRID Rule as promulgated by the CFPB.