News from the Division of Financial Institutions

Thoughts From Superintendent Allard

Welcome to 2020. In reflecting on a very strong 2019, we continue to have an Ohio state-chartered banking industry that is strong financially and successfully serving Ohio’s communities. At the Division, we are fortunate that we continue to have experienced and skilled examiners and supervisors in our banking section including dedicated trust examiners and information technology risk examiners. For 2020, we continue to be focused on providing timely and effective outreach on important topics to our banking organizations. In early 2020, we convened a meeting of information technology leaders from our state-chartered banks and credit unions to discuss and better understand technologies that are being utilized to deliver financial services. This is an initial meeting that will likely result in further conversation between industry leaders and federal and state regulators. Also, we are very excited about this year’s Ohio Bankers Day program which is being held on March 18 and 19. Please mark these dates on your calendar and plan to attend this event at The Hilton Columbus at Easton.    Additionally, we need to hear from you. We recently reengineered our post examination survey both in terms of content and delivery. The survey has been shortened and is being delivered in an electronic manner in conjunction with the report of examination. It is important for us to hear from you in Ohio regarding the examination process and your suggestions for improving how we conduct our examinations. Please take the time to complete this short survey and return via-email. Also, as noted in this newsletter, we are seeking input on our fall roundtables. Please take a moment to visit the SurveyMonkey site and let us know how we can make that interactive session more productive for you.   I look forward to seeing everyone at Ohio Bankers Day 2020.

Banking in Ohio: One Hundred Years Ago Sheila Schroer   1920 was the beginning of an era - the Roaring Twenties. Banks were adjusting to peacetime and prosperity. In Ohio, traditional banking services were offered by incorporated and unincorporated (private) banks and building and loan associations. Most financial institutions were state-chartered. The Ohio Department of Banks and Banking (ODBB) had been established in 1908, and the Ohio Bureau of Building and Loan Associations (OBBLA) in 1891 as part of the Ohio Department of Insurance. [i]  As of June 30, 1920, each department coincidentally had 775 state-chartered institutions.  Fifty-eight state banks had trust powers. The largest state-chartered institution was The Cleveland Trust Company with $105 million in assets.  More than 75% of the banks had less than $1 million in assets and only 40 exceeded $5 million. Most banks paid less than $100 in assessments to the Department. The Superintendent’s annual salary was set in statute at $7,500.  Branching was only permitted in cities or villages contiguous to the city of incorporation. Eighty-one banks were members of the seven-year-old Federal Reserve System.  The population of the city of incorporation determined the minimum capital requirement for the bank.  The state’s banking laws had just undergone a major revision. The recodification effort began in early 1918, and the new code was effective July 1, 1919. The Superintendent of Banks noted in his 1920 Annual Report to the Governor that the new state banking code was “looked upon as probably the most advanced banking legislation created by any state legislature.”  As of June 30, 1920, the ODBB staff consisted of a Superintendent, an assistant Superintendent, a Chief Examiner, 10 examiners, four assistant examiners, an attorney, a liquidating agent, a special deputy for foreign exchange, and six office staff. Annual unannounced examinations were required, and during fiscal year 1920, the ODBB completed 934 examinations for the 775 banks. In addition to regular examination work, 38 state banking charters were issued, and two banks failed, and seven were in the process of liquidation.  The OBBLA had two inspectors, two deputy inspectors, 14 examiners, and four office staff. No examination data was available, but annual examinations were required. The Bureau issued 38 new charters and was in the process of liquidating two institutions.    Today, more than half of the State-chartered banking institutions in Ohio can trace their roots back to 1920 and many were in existence when the ODBB and the OBBLA were established.  These institutions have faithfully served their communities through periods of economic hardship, war, political and social unrest, and industry consolidation. They have thrived being the backbone of the Ohio’s economic strength. [i] In 1921, the Division of Building and Loan Associations was created and became part of the Department of Commerce. The Inspector was retitled “Superintendent”.

Regional Roundtable Reaction Every fall, the Superintendent, Deputy Superintendent, and staff members hold regional roundtables throughout the state to meet with Ohio bankers in an informal setting.  Typically, the meeting begins with Division staff presenting an update on the department’s personnel, budget, examination statistics and examination trends. Next is a discussion of local economic and business issues and other hot topics, and finally there is a Q&A session for bankers to bring any questions or concerns to the attention of the Division’s staff.  We would like your input and suggestions on how to improve this interactive session, to make it more interesting and relevant to banks, and hopefully boost attendance. 1.   Is the timing and locations of the meetings convenient? Typically, they are on a Tuesday, Wednesday or Thursday from 10 am to 12 pm at a local hotel or meeting center in Findlay, Blue Ash, Athens, Canton and Columbus.   2.   We are considering holding 4 roundtables instead of 5 this year. For bankers who typically attend the Athens meeting, would you be willing to attend the Canton, Columbus or Blue Ash meeting instead?    a.   Alternatively, we could combine the Columbus and Athens meetings into one meeting, held in either Lancaster or Zanesville. If you normally attend Columbus or Athens, would you be willing to attend the meeting if it were held in either of these locations?   3.   Are the topics covered by Division of interest to you? What other topics should we discuss? What topics should we stop addressing?   4.   Do you have any other suggestions or comments about format, topics, timing, etc.?   We have created a SurveyMonkey poll which is available until May 1. Please click the button below to fill out the survey. Your response is very much appreciated.

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Conference of State Bank Supervisors Special Recognition Award   Amy Studer   Shaun Starr, Banks Field Examiner in Northeast Ohio, received this year’s Conference of State Bank Supervisors (CSBS) Special Recognition award for his work as an instructor at their technical schools. To qualify, an instructor must have the recommendation of the CSBS professional development staff and demonstrate one or more of the following; course innovation that vastly improves the learning experience, outstanding instructor performance, and significant contribution about normal expectations.   In receiving this award, Shaun was recognized for demonstrating outstanding instructor performance for Effective Meetings with Management and the Examiner-in-Charge (EIC) training. He led the content development of materials for information technology examiners to use during portions of EIC School, and revised evaluation forms to streamline the way instructors rate attendees. Always dependable, Shaun worked closely with team members on revisions and always submitted training materials in advance.   Shaun is in his fourth-year teaching for CSBS. In addition, two others in the Division are involved in teaching for CSBS; Bob Rusbacky, Southwest Ohio Regional Supervisor, has been teaching the Credit Evaluation School for five years and Amy Studer, Northeast Ohio Regional Supervisor, has been teaching the Bank Analysis School for three years. The three of them travel around the country teaching other state examiners on their respective technical school topic.   “We are very fortunate to have Shaun in the Northeast crew; he is a great asset to our Division and is passionate about providing training to our examiners. Having three senior examiners training on a national level brings an extra layer of expertise and perspective about the examination process that is extremely valuable to all our examiners,” said Superintendent Kevin Allard.

The Hilton Columbus at Easton March 18-19, 2020

Remote Work - Lessons Learned Joseph Bramer   Remote work – when employees work away from their company’s office – has been gaining in popularity for several years now. By allowing employees to work remotely, companies have been able to experience cost savings, attract and retain a wider range of talent, and provide their employees with an improved work-life balance. Over the past year the Division has been allowing examiners to use remote work more frequently and we have learned some important lessons from it. For starters, remote work is not for everyone. Not only does an employee have to have a job that is conducive to working remotely, but that employee must also have the right type of work attitude and have the trust of their supervisor. Bank examination often requires quiet, focused work which is conducive to a remote work environment. In order to be approved for remote work, an employee must demonstrate that they are capable of completing job tasks in a timely manner without a lot of direct oversight or supervision. Additionally, communication with remote employees is imperative. Remote employees can feel isolated, much like they are on an island. It is important to establish regular touch points with those employees, such as daily or weekly, to ensure employees remain on task and are engaged with the larger group. Computer software can be a big help in this area. For example, the Division is currently testing the use of Microsoft Teams for training, one-on-one conversations, and video conferencing. While it can feel strange at first, examiners are really starting to appreciate the increased interaction.  Finally, the safeguarding of confidential information cannot be stressed enough. Remote employees operate outside of the normal IT environment, so it is vital to ensure that appropriate safeguards are in place. From encrypted laptops and smartphones, to virtual private networks and secure network connections, there are several solutions to consider so that a breach does not occur. Employees must also be very aware of their surroundings if they are working in a public place such as a library.  If your organization does consider utilizing remote work, keep in mind that it’s a process, and like all processes it needs to be managed and tailored to fit your individual needs. Working remotely is a skill, both on the side of the employer and the employee, that needs time and even training to develop.

Technology Advisory Group Meeting Ingrid White   The inaugural meeting of the Technology Advisory Group, or TAG, was held on January 23 in Columbus. Eight chief information officers, four from banks and four from credit unions, met with Superintendent Allard and other Division staff, as well as federal regulatory agencies. The Division established the TAG in an effort to better understand emerging technologies and their risks, with a view to educate and train IT examiners in the future.  In discussing the groups’ purpose, industry group members stated they also wanted to discuss new technologies with their counterparts, and better understand technology disrupters and risks.  Lack of flexibility in the core operating systems, with lengthy contracts and difficulty transitioning to other platforms, was cited as one of the top problems for financial institutions seeking to be forward-thinking about adopting fintech and regtech. However, data systems are changing, such as the development of cloud-based platforms and self-service data access, which may transform the way core service providers operate in the industry. The European ‘open banking’ system of data portability, if adopted widely in the U.S., may provide an avenue for financial institutions to diversify their technology products and services.  Deputy Superintendent of Credit Unions Rob Rutkowski said, “getting such a wide swath of IT professionals together to discuss what they are working with every day has been quite enlightening from a regulator’s perspective. For instance, one of the more surprising take-aways for me involved gaining a deeper understanding of Interactive Teller Machines. Prior to the meeting, I had thought that ITMs were being adopted because of the wide range of services they provide, but it turns out that their primary benefit is improved efficiency and cost savings for the teller line.” Moving forward, the TAG agreed to meet twice more in 2020, and bring in expert speakers to address the group on certain focused topics. The next meeting is scheduled for June 7 in Columbus.

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