Formation of more de novo banks, reduced regulatory burden for community banks, and establishment of an “Office of Innovation” are all priorities for 2019 of the chairman of the federal insurer of bank deposits, the chairman of the agency’s board writes in its annual report.
In her “message from the chairman” in the 2018 annual report by the Federal Deposit Insurance Corp. (FDIC), issued Friday, Jelena McWilliams wrote that the agency is “hard at work” to encourage formation of new banks, which she called “one of my top priorities.”
“De novo banks are a key source of new capital, talent, ideas, and ways to serve customers, and the FDIC will do its part to support this segment of the industry,” McWilliams wrote. She stated that, to encourage the new banks, the FDIC is seeking public comment about the deposit insurance application process (seeking potential improvements) and streamlining evaluation of insurance applications. The agency has also started a process to receive and review draft deposit insurance proposals, she wrote.
For reducing regulatory burden for community banks – “without sacrificing consumer protections or prudential requirements” – McWilliams wrote that the agency is tailoring its regulatory requirements “to the risk presented by these smaller institutions, thus reducing their cost of compliance,” she stated. “When we make these adjustments, we allow banks to focus on the business of banking, not on the unraveling of red tape.”
As for development of its Office of Innovation (which she said will be aimed partnering with banks and non-banks to understand how technology is changing the business of banking), McWilliams detailed four questions that must be answered:
- How can a safe regulatory environment promote the technological innovation that is already occurring?
- How can technological development be promoted at community banks that often have limited research and development funding to support independent efforts?
- What changes in policy – particularly in the areas of identity management, data quality and integrity, and data usage or analysis – must occur to support innovation while promoting safe and secure financial services and institutions?
- How can the FDIC transform – “in terms of our technology, examination processes, and culture” – to enhance the stability of the financial system, protect consumers, and reduce the compliance burden on our regulated institutions?
“Through increased collaboration with FDIC-regulated institutions, consumers, and financial services innovators, we will help increase the velocity of innovation in our business,” she stated.