CSBS Emphasizes Need for Industry and Supervisory Diversity at Senate Hearing on Regulatory Reform

by 20 Mar 2009
Conference of State Bank Supervisors 1155 Connecticut Avenue, NW, 5th Floor, Washington, DC 20036 CSBS Emphasizes Need for Industry and Supervisory Diversity at Senate Hearing on Regulatory Reform Washington, D.C. (March 19, 2009) ? Joseph A. Smith Jr., North Carolina Commissioner of Banks and Chairman-elect of the Conference of State Bank Supervisors (CSBS), today urged policymakers to remember that the health and effectiveness of our nation?s financial system depends on a diverse and competitive marketplace that includes community and regional institutions. Testifying before the Senate Banking Committee at the first in a series of hearings on modernizing bank supervision and regulation, Smith pointed out that states charter and supervise more than 70 percent of all U.S. banks, in coordination with the FDIC and Federal Reserve. However, industry consolidation over the past decade has created a system in which a handful of large national banks control the vast majority of assets in the system. ?We have often heard the consolidation of financial regulation at the federal level is the ?modern? answer to the challenges of our financial system,? Smith said, ?We need to challenge this assumption,? he stated. ?While there are clear and unambiguous federal interests in financial regulation, there remains a very clear value and need for more localized regulation. Understanding that our country is comprised of thousands of communities ? not just a dozen MSAs ? is why state regulators have been so vocal in defending a state role in financial regulation,? Smith said. Smith suggested that Congress should consider a bifurcated system of supervision that is tailored to the size, scope and complexity of financial institutions. ?In financial supervision, one size should no longer fit all,? he said. ?Congress must strive to prevent unintended consequences from doing irreparable harm to the community and regional banking system in the United States,? Smith said, referencing the ?too big to fail? paradox. ?If we have learned nothing else from this experience, we have learned that big organizations have big problems. As you consider your responses to this crisis, I ask that you consider reforms that promote diversity and create new incentives for the smaller, less troubled elements of our financial system,? Smith said. ?Our nation?s financial system will be strengthened by not just preserving but promoting a more diverse industry, he concluded. # # # Smith?s testimony from Thursday?s hearing is available at http://csbs.informz.net/csbs/data/images/legislative/smithsenateregulatoryreform.pdf CSBS is the nationwide organization for state banking, representing the bank regulators of the 50 states, the District of Columbia, Guam, Puerto Rico and the Virgin Islands, and approximately 6,000 state-chartered financial institutions. The Conference is responsible for defending state authority to determine banking structure and the products and services state-chartered institutions can offer and for improving the quality of state bank supervision by providing department performance evaluation and accreditation programs and supervisory education/training programs for state banking department personnel. Information Contact: Mary White, Vice President, Communications, (202) 728-5715, mwhite@csbs.org


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