CSBS Issue Talking Points

State Regulatory Experience in Federal Agency Leadership

CSBS Position

CSBS strongly believes state regulators’ unique perspectives are a foundational piece of the federal financial regulatory fabric. Federal law requires state regulatory representation as part of federal agency leadership, such as the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve Board. Congress also recognized the importance of state regulatory participation in interagency policy forums, such as the Federal Financial Institutions Examination Council (FFIEC) or Financial Stability Oversight Council (FSOC). Unfortunately, recent appointments to the FDIC Board have not met the letter or the spirit of the law. CSBS uses a variety of advocacy approaches, through commissioners and CSBS staff, to try to influence the White House, Senate leadership and other stakeholders on the need to meet the Federal Deposit Insurance Act’s requirement that at least one FDIC Board member have state bank supervisory experience. Congress has long recognized the key role and unique insight of state regulators and the value they provide as federal agency leaders. Over the years, Congress has passed into law measures that ensure state regulators serve on the FDIC Board or as governors of the Federal Reserve. Congress also has provided state regulators with responsibility for federal policy in interagency contexts, such as the FFIEC’s State Liaison Committee or FSOC’s non -voting state banking member. Despite clear congressional intent, implementation of these legal requirements can be inconsistent. For example, the FDIC Board has not included a member with “ State bank supervisory experience ” since 2012, when the White House and Congress stretched this language to say a former Federal Reserve Bank president met this requirement by having supervised state member banks. In past Congresses, CSBS has supported bipartisan, bicameral legislation that would clarify the need for a state bank regulator on the FDIC Board. Summary

Why it Matters to State Regulators

Stat e regulators charter and supervise nearly 80% of the nation’s banking industry (including the vast majority of community banks) and serve as the primary regulators of nonbank financial services companies. Their insight is critical in understanding how federal regulations impact local institutions and credit markets.

Talking Points

• Congress has long promoted state regulators' membership in interagency bodies and leadership at federal agencies; however, congressional intent and historic precedent are not always followed, leaving out the critical perspective of state regulators in federal policymaking. • The Administration and Congress must ensure state regulators’ vital voice is included in federal agency leadership. • The FDI Act requires that one member of the FDIC Board have state bank supervisory experience. The letter and the Congressional intent behind the law are clear: this requirement can only be met with an individual who has worked in state government as a state regulator of state-chartered banks.

SME Contact: Camille Polson, Senior Analyst, Policy Development: 202-407-7165 or cpolson@csbs.org

Date Updated: February 2021

FOR STATE REGULATOR USE ONLY