CSBS Issue Talking Points - March 2021

State Examination System

CSBS Position State regulators have a goal of an integrated, 50-state system of licensing and supervision called Networked Supervision. The State Examination System (SES) is a software system created by CSBS to hasten the realization of this goal. Launched in October 2019, SES provides an efficient and secure platform for states to conduct exams, investigations and complaints in a collaborative, networked manner that preserves state control over information sharing. Through SES, state regulators have a powerful tool to bring uniformity, efficiency and a less burdensome supervisory process for companies that ensures the state system remains the chosen environment for financial service providers. Summary SES is an end-to-end system. Examiners can use it to schedule the exam, create the scope, prepare and send information requests, receive information request responses, create the exam plan, conduct reviews with exam procedures, build the report of examination and track ongoing issues. With complaints, agency users can intake a complaint they receive, transmit it to the company and review company responses in the system. Industry users can use SES to efficiently exchange data and documentation for that exam or complaint. While SES is built to support nonbank supervisory activities, the system could be modified to support bank examinations if agencies need such a system in the future. Why it Matters to State Regulators SES is a no-cost solution to a common agency problem: lack of a single platform for their exams, investigations, complaints and other supervision work. SES solves that problem and takes it further by allowing agencies to leverage the work already done by one regulator, or network, and utilize it to complete their own supervision responsibilities Further, SES improves intra-agency information sharing, i.e., the information shared within state agencies. Staff responsible for the licensing functions should have access to the information generated through the supervisory function of the agency and vice versa. Picking up where a previous regulator left off allows the incoming regulator to focus on new risks or follow-up on risks already identified. SES allows for partnering with other state agencies on supervisory activities as much as possible, which will reduce regulatory burden for companies that are supervised by more than one agency. Having a view into the supervisory findings from one agency will allow another agency to better allocate resources and schedule their own supervisory activities. State regulators will also share exam manuals and procedures which will help drive uniformity and consistency across the states. Talking Points • By year end 2020, more than 30 state agencies had onboarded to SES and over 450 exams were conducted. • SES expanded in late 2020 to offer complaints processing and handling services, now used by 11 agencies. • The states’ networked supervision goals are furthered by adoption of SES, as it brings agencies onto a single, more uniform platform on which to conduct their supervision activities.

FOR STATE REGULATOR USE ONLY