The United State’s banking system is a highly complex banking system. To help regulate these financial institutions, six primary regulatory agencies were created to address issues within the system. The six regulatory agencies are the Board of Governors of the Federal Reserve System (The Fed); the Federal Deposit Insurance Corporation (FDIC); the Office of Thrift Supervision (OTS); the Comptroller of the Currency (OCC); the National Credit Union Administration (NCUA), and State Regulators. Within the current regulatory environment over banking activities, regulatory functions performed by the state and federal regulators may be divided into three broad categories: Chartering, Supervision, and Examination (Malloy, 2003). Each regulatory agency plays a specific role in the regulatory environments listed above. However, with each regulatory agency creating policy within their own silos, financial institutions will pay the ultimate price for the non-standardization between the regulatory agencies. To help with this problem of a non-standardized system, the Federal Financial Institutions Examination Council (FFIEC) was established.
The FFIEC was established on March 10, 1979 as part of the Financial Institutions Regulatory and Interest Rate Control Act of 1978 (FIRA). The Appraisal Subcommittee (ASC) was established in 1989 as part of the Financial Institutions Reform, recovery and Enforcement Act of 1989 (FIRREA). The ASC’s powers grew in 1980 when the Housing and Community Development Act was passed. This act gave the ACS the responsibility to facilitate public access to data that depository institutions must disclose under the Home Mortgage Disclosure Act of 1975 (HMDA) (FFIEC, 2010). The Council is empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions for the federal examination of financial institutions in each of the federal regulatory agencies and to make recommendations to promote uniformity in the supervision of financial institutions (FFIEC, 2010).
With the FFIEC helping the federal regulatory agencies with their day to day tasks and helping to recommend and promote uniformity, who is looking at for the local interest of the state banks? The Conference of State Banks Supervisors (CSBS) has been positioned as the only national organization dedicated to protecting and advancing our nation’s dual banking system (CSBS). In 2006, the State Liaison Committee (SLC) was added to the FFIEC as a voting member, which the CSBS is a part of. The CSBS has a number of roles that it performs for the state banks. Some of those roles are (CSBS, 2010):
- Optimize the authority of individual states to determine the activities of their financial institutions.
- Enhance the professionalism of state banking departments and their personnel.
- Represent the interests of the state banking system to federal and state legislative and regulatory agencies.
- Ensure that all banks continue to have the choice and flexibility of the state charter in the new era of financial modernization.
The FFIEC is like a one stop shop for financial information and reporting for the banking industry. One of the services that the FFIEC offers is the Rating Systems. Ratings known as the Uniform Financial Institutions Rating system, which is referred to as CAMELS rating, evaluates and rates all financial institutions under the FFIEC. The CAMELS rating highlights six different areas of bank performance, Capital adequacy, Asset quality, Management administrations, Earning, Liquidity, and Sensitivity to market risk (OCC, 2008). This rating system allows for a better approach to accessing the stability of the banking system as a whole. With the ability to access banks the FFIEC provides a crucial service the each regulatory agency.
Summary
Both the FFIEC and the CSBS play a crucial part in our banking system. As we move on in this ever unfolding financial crisis that we find ourselves in, will these two organizations continue to be effective in today’s world? Is the creation of these two agencies a sign that government has gotten two big and reform is hopeless unless it simplifies the processes that take place? With new reform coming, only time will tell if politicians did enough to make sure the future of banking will be here for the next generation.
References
CSBS. (n.d.). About the CSBS. Retrieved July 1, 2010, from CSBS.org: http://www.csbs.org/Content/NavigationMenu/AboutUs/WhatisCSBS/WhatIsCSBS.htm
CSBS. (2010). CSBS.org. Retrieved July 1, 2010, from CSBS Works To: http://www.csbs.org/Content/NavigationMenu/AboutUs/WhatCSBSDoes/WhatCSBSDoes.htm
FFIEC. (2010, March 9). About the FFIEC. Retrieved July 1, 2010, from FFIEC.gov: http://www.ffiec.gov/about.htm
Malloy, M. P. (2003). Principles of Bank Regulation Second Edition. St. Paul, MN: West Group.
OCC. (2008, April). A guide to the National Banking System. Retrieved July 1, 2010, from occ.treas.gov: http://www.occ.treas.gov/nb/nbguide.pdf
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