CSBS Policy Update Mary M. Pfaff, Senior Director, Legislative Policy, CSBS

1. CSBS Policy Update Mary M. Pfaff, Senior Director, Legislative Policy, CSBS NACARA Annual ConferenceSanta Fe, New MexicoSeptember 16, 2019

2. Serving the State System Advocacy Empowerment Non-depository Supervision Legislative Communications Supervisory Processes Regulatory Education Programs Data Analytics Examiner Certification Department Accreditation NMLS

3. About CSBS CSBS represents state regulators in Washington, DC CSBS works… WITH FEDERAL REGULATORS ON CAPITOL HILL WHERE INTERAGENCY WORK OCCURS Including FFIEC, FBIIC & FSOC CSBS offers… PROFESSIONAL DEVELOPMENT EXAMINER CERTIFICATION DEPARTMENT ACCREDITATION

4. BY THE NUMBERS: THE U.S. BANKING INDUSTRY 5,302 total banks 79% state chartered 4,511 banks under $1B 92% community banks Heatmap of the U.S. Banking System

5. 2019 COMMUNITY BANK CASE STUDY COMPETITION ■Participating schools (25 total) Competition participation, by state, in 2019 Public Policy Focus Impact on a bank’s ability to serve its community from S.2155 Participants 25states 51 schools 70 teams Previous winners 2015: University of Utah 2016: Southeastern Louisiana University 2017: University of Akron 2018: Eastern Kentucky University 2019: Juniata College

6. CSBS Major Committee Structure

7. LEIGISLATIVEFINANCIAL SERVICES PRIORITIES • Bank Service Company • Model Third Party Service Provider Law • Marijuana Banking • Beneficial Ownership • GSE reform • BSA/AML reform • Data Privacy • Fintech • FDIC Board Seat • Affordable housing • Consumer protection and the CFPB • Oversight of federal financial regulators

8. BSA/AML Reform Rising compliance costs and complexity Role of private sector in policing financial system Improving the feedback loop Beneficial ownership information FinCEN’s current and future capabilities

9. FINANCIAL SERVICES ISSUES TO WATCH: House BSA/AML REFORM (2) H.R. 2514 COUNTER Act H.R. 2513 Corporate Transparency Act • Unanimously approved by the House Financial Services Committee on May 9 • Strengthening FinCEN • Coordination and information sharing • Shared compliance resources • Study on de-risking • Encourage innovation in compliance • Index CTR threshold • Approved by House Financial Services Committee 43-16 on June 11 • Aimed at combating illicit financial activity through anonymous shell companies • Requires disclosure to FinCEN of beneficial ownership information at the time of incorporation

10. FINANCIAL SERVICES ISSUES TO WATCH: MARIJUANA & BANKING Banking safe harbor SAFE Banking Act STATES Act Tax issues

11. FINANCIAL SERVICES ISSUES TO WATCH: FINTECH Banks and innovation • Vendor management & BSCA; bank partnership models Non-bank lending & payments companies Sandboxes State-federal balance in regulation Cryptocurrency

12. MORE FINANCIAL SERVICES ISSUES TO WATCH Data Security & Breach Notification Credit Reporting Agencies Housing Finance Reform

13. REGULATORY POLICY • Provides the state perspective on federal regulatory policy proposals that directly affect state-supervised entities • 2019 Comment Letters include: • CFPB proposed rulemaking for Payday, Vehicle Title, and Certain High-Cost Installment Loans • Regulation D: Reserve Requirements for Depository Institutions • Legislative Efforts on Data Privacy and Security • Joint Letter with NACARA on CFPB Proposed Debt Collection Rule

14. THE REGULATORY AGENDA S. 2155 ISSUES PRINCIPAL ISSUES • Community Bank Leverage Ratio • Brokered deposits • Short form call report • Portfolio QM • Appraisal relief (rural areas) • Transparency • Exam modernization • Community Reinvestment Act Reform • BSA/AML reform • Appraisal thresholds/requirements • De novo banks • Compliance exams

15. NON-DEPOSITORY SUPERVISION • Cybersecurity Model Work Group • NonBank mortgage supervision • Modernizing prudential standards • Examination capacity • Exam modernization • Communications Interface with CFPB, FinCEN, IRS, FHFA • Administrative arm of the multistate non-depository functional committees (MMC, MMET, SCC and NDSC) • White Paper

16. ACCREDITATION, CERTIFICATION AND LEARNING & DEVELOPMENT • Accreditation: Bank, Mortgage and MSB • Certification: Examiner Certification Program • Learning & Development: • Awareness: Fair Debt Collection • Installment Lending: Collections • Financial Service Centers: Collections

17. State Regulators …Are Moving Forward with Vision 2020: 1 2 3 Multistate harmonization Industry engagement Common technology platform Improving licensing and supervision while enhancing consumer protection based on industry input Adopt best practices and drive towards uniform examinations Rebuild NMLS on a modern platform 4 5 6 Assist state bankingdepartments Support banking services for nonbanks Improve third-partysupervision Automate exam process, introduce better analytics, adopt higher standards Address de-risking and dispel uncertainties of regulatory regimes for BSA-AML Support federal legislation that improves state-federal coordination

18. Vision 2020 Roadmap

19. State Examination System (SES)

20. MSB Initiatives

21. Reengineering Nonbank Supervision • White Paper • Stakeholder awareness document covering state supervision of the nonbank marketplace • A change document or roadmap to assist state supervisors to: • Identify the current state of supervision • Make informed changes to state supervisory processes • Chapter One: Introduction to the Nonbank Industry • Chapter Two: Overview of State Nonbank Supervision

22. CSBS and Fintech Coordinate and Convene • 2013 • Emerging Payments and Innovation Task Force • Emerging Payments and Fintech Issues • Stakeholder Engagement • Improve Non-Bank Licensing and Supervision • Discuss Policy Issues • 2019 • Fintech Steering Group • CSBS focal point for fintech • Oversee and coordinate fintech initiatives • Spot new developments and emerging issues

23. CSBS and Fintech: Stakeholder Engagement Engagement • Public Hearing on Payments • Experts • Regulators • Industry Seek Public Comment • Fintech Industry Advisory Panel • 33 companies • 18 months,100 hours of meetings • 2 White Papers, • 19 recommendations • Fintech Forum • Regulators • Industry Reps • Consumer Groups

24. FIAP Deep Dive Financial Industry Advisory Panel Fintech Industry Advisory Panel Propose Solutions 33 Companies Identify and Prioritize Pain Points Commitment by Companies and Regulators 18 months 100 hours of calls and meetings

25. FIAP Deep Dive Financial Industry Advisory Panel • The Outcome • 2 Industry White Papers • Implementing 14 of 19 recommendations • Standardization in MSB Licensing Approaches • Resources to Help Navigate State Licensing • Expanded Use of NMLS • Consistent Reporting Requirements & Deadlines

26. Mandate of the FIAP Lending Subgroup

28. 50-State Consumer Finance Survey Product Type/Name Loan Terms:Physical Presence Required Minimum Loan AmountAllow On-Line Lending Maximum Loan AmountLicensed Through NMLS Minimum Loan Term Financial Requirements Maximum Loan TermSurety Bond Maximum Finance Rate/sLicense Renewal Fees:Collects Data or Annual Report Origination FeesApplicability to Commercial Lending NSF ChargesRequired Disclosures Late Fees Ability to Pay/Proof of Income Misc. Fees

31. OCC Fintech Charter Important Points Federal Charters - No Authority Lawsuits Filed Limited Chartering Powers Harms Consumers Only Congress Can Decide Distorts Marketplace Congress has not given OCC authority to issue federal charters to non-banks CSBS and New York DFS have filed suits to block OCC efforts. OCC chartering powers are limited to entities engaged in the “business of banking. Consumers are harmed by pre-empting consumer protections Creates public policy implications to be debated in Congress. Harms the marketplace by picking winners and losers