CSBS Issue Talking Points

NMLS Modernization

CSBS Position

CSBS is committed to providing state regulators with robust tools and technology that will enable them to manage nonbank supervision more efficiently. As the nonbank financial services industry continues to grow, the need for more sophisticated, data-driven technology systems is vital. Building a modernized Nationwide Multistate Licensing System (NMLS) will help us accomplish this goal as we drive toward Networked Supervision.

Summary

The next generation nationwide multistate licensing and supervisory technology system is being developed to anticipate and accommodate the evolving needs of the state system of financial regulation. CSBS’s goal is to build a new system that:

• Empowers state authority through data-driven solutions • Promotes efficient operations and networked supervision among regulators • Creates an optimized user experience

The modernized NMLS will employ a new licensing requirements framework that creates efficiencies for both state regulators and industry and supports Networked Supervision. With this new framework, state regulators will move away from managing the licensing process based on state-specific requirements and instead follow agreed upon standard requirements. This standardized approach will be established and implemented first for the money services business industry (MSB). The debt, consumer finance and mortgage industries will transition to the modernized NMLS in phases. The modernized NMLS will be data-driven and use analytics to automate processes, identify risks, prioritize resources and provide reports and visualizations for decision making. This functionality will allow states to manage annual license renewals based on exceptions and risks. In addition, the State Examination System will share and coordinate examination schedules to limit examinations through multiple agency participation or post-examination sharing. State regulators are the primary stakeholders of the modernized NMLS. State regulators, with CSBS support, will take the lead in determining and adopting standard requirements for the new licensing framework. State regulators will also drive internal changes to their existing licensing process and may influence changes to their state laws in preparation for a modernized NMLS. Consistent with networked supervision, the new NMLS will: • Include a single source of standardized data that all regulators require • Support interdependent reviews by state agencies based on uniform standards that allow agencies to rely on another agency’s work • Use common nationwide licensure and compliance thresholds by industry • A modernized NMLS will benefit for both state regulators and industry: o State agencies will experience greater operational efficiencies, including the ability to rely on another agencies’ work . o Industry will have a more streamlined, user-focused experience as they go through the state licensing process. • Development for the modernized NMLS began in 2021 and will focus initially on the MSB industry, the first industry to transition to the modernized NMLS. • CSBS staff will support state regulators as they collaborate to establish, define and implement standardized licensing requirements that will drive how the licensing process is managed in the modernized NMLS. FOR STATE REGULATOR USE ONLY Development for the modernized NMLS began in 2021. Why It Matters to State Regulators Talking Points