Today, the Conference of State Bank Supervisors (CSBS) Board of Directors announced Vision 2020, a series of initiatives to modernize state regulation of non-banks, including financial technology firms. Achieving this vision should result in a regulatory system that makes supervision more efficient and recognizes standards across state lines – actions that will better support start-ups and enable national scale while protecting consumers and the financial system.
The CSBS Board approved a policy statement: “CSBS, the states and territories will create consistent and data-driven solutions that support innovation by minimizing friction in the state regulatory system. By 2020, state regulators will adopt an integrated, 50-state licensing and supervisory system, leveraging technology and smart regulatory policy to transform the interaction between industry, regulators and consumers.”
“We are committed to a multi-state experience that is as seamless as possible,” added CSBS Chairman and Texas Commissioner of Banking Charles G. Cooper. “Through Vision 2020, state regulators will transform the licensing process, harmonize supervision, engage fintech companies, assist state banking departments, make it easier for banks to provide services to non-banks, and make supervision more efficient for third parties.”
Among the initial set of actions that CSBS and state regulators are taking:
- Redesign the Nationwide Multistate Licensing System (NMLS). CSBS has launched a technology effort that redesigns and expands NMLS, the common platform for state non-bank regulation. The redesign will use data and analytics to provide a more automated licensing process for new applicants, streamline multi-state regulation, and shift state resources to higher-risk cases. State regulators also will ensure transparency through NMLS Consumer Access, which was viewed 3.7 million times last year.
- Harmonize multi-state supervision. CSBS has created working groups to establish model approaches to key aspects of non-bank supervision. The groups will work to enhance uniformity in examinations, facilitate best practices, and capture and report non-bank violations at the national level. To further streamline the process, CSBS will create a common technology platform for state examinations.
- Form an industry advisory panel. CSBS will establish a fintech industry advisory panel to identify points of friction in licensing and multi-state regulation, and provide feedback to state efforts to modernize regulatory regimes. The panel will focus on lending and money transmission, and discuss a wide range of solutions. Individual state regulators already have been engaging the fintech industry in formal dialogue.
- Assist state banking departments. CSBS education programs will make state departments more effective in supervising banks and non-banks. Updated standards and analytics will help states determine where new expertise is most needed, identify and address weaknesses, update supervisory processes, and compare themselves to and learn from other state departments. These higher standards will be validated through an enhanced CSBS accreditation program.
- Make it easier for banks to provide services to non-banks. CSBS is stepping up efforts to address de-risking – where banks are cautious about doing business with non-banks, due to regulatory uncertainty – by increasing industry awareness that strong regulatory regimes exist for compliance with laws for money laundering, the Bank Secrecy Act, and cybersecurity.
- Make supervision more efficient for third parties. Banks of all sizes work with a variety of third-party service providers, including fintech companies. CSBS supports federal legislation that would allow state and federal regulators to better coordinate supervision of bank third-party service providers.
Together, these and other initiatives will help advance the vision for a more streamlined state regulatory system that supports business innovation, local and national economic growth, and essential protections for consumers and taxpayers.
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The Conference of State Bank Supervisors (CSBS) is the national organization of bank regulators from all 50 states, District of Columbia, and U.S. territories. State regulators supervise roughly three-quarters of all U.S. banks and a variety of non-depository financial services. CSBS, on behalf of state regulators, operates the Nationwide Multistate Licensing System to license and register those engaged in mortgage, money transmission, consumer finance, and debt collection industries.