Happy 2021! I am hopeful this year will be full of the perfect amounts of capital, earnings and liquidity for all of you and that we soon get to resume seeing each other in person. Drinks are on me.
Big things are happening nationally in the financial services arena that may seem distant from our world, but could have a significant impact on community banks. The OCC has issued a charter to a fintech that doesn’t take traditional, insured deposits and has also issued the first national crypto bank charter to a trust company. This expansion of the OCC’s authority is being challenged by the national banking trades, the Conference of State Bank Supervisors, and numerous states because it is outside of the OCC’s congressionally granted authority. The Division is concerned about this for a number of reasons, not the least of which is that a national charter could allow these non-bank companies to circumvent individual state’s consumer protection, licensing and interest rate laws. State supervisory authority in this area is critical to protecting Montanans and has allowed the Division to assist citizens that have had challenges with nationally operating companies that don’t have a physical presence in the state.
At a more local level, although the Division does not have any agency sponsored legislation this session, we are paying close attention to all of the activity over at the Capitol. The Division has been helping to draft a bill modernizing the building and loan association act so that it will be possible for mutual banks to operate as a state-charter in Montana. We are also watching a number of bill requests that have been turned in that could impact banks and other financial service providers, including a possible state-owned bank bill. Deja vu all over again…
The Gianforte Administration has finalized all Cabinet-level appointments and has announced the Director of the Department of Administration (my boss), Misty Ann Giles. Director Giles previously served as the Chief of Staff at Rural Development within the USDA. In that position, she oversaw Rural Development’s $250 billion loan portfolio making her incredibly familiar with issues concerning credit risk and banking. She firmly subscribes to the tenet that “Better is Always Possible” and all of us at the Division look forward to her energetic, innovative and inclusive leadership. (Thanks so much to Don Bennett for serving on the Director selection team for the Department of Administration!)
As most of you know, the Division’s primary focus on the bank side of the office is on maintaining and improving our offsite examination program so that we can continue to do our jobs while causing as little disruption to you doing your jobs as possible. We are contemplating how best to do this given the ongoing cybersecurity challenges with vendors as a result of recent events. We are hopeful to be able to return to a more normal exam process by mid-year, but expect that some parts of the remote examination program are here to stay as they make for a more efficient exam process overall. We are also paying attention to continued balance sheet growth and its impact on capital levels. Paycheck Protection Program forgiveness has been a slow process and additional PPP loans are now being made under the recent stimulus bill. Although we appreciate and encourage the hard work that our banks are doing to assist their customers and manage the challenges that come with this balance sheet growth, it will be interesting to see how long these balance sheet issues persist. We are looking forward to hearing from bankers during exams how you are planning for dealing with these challenges in the short-run, but also in the long-run in the event this temporary(?) growth does not abate.
The Division is, as always, keeping a close eye on asset quality at our banks. Our Montana bankers spent significant time in 2020 working with the customers to make loan modifications in a time of financial strain in the economy. While loan quality has remained satisfactory and government programs have provided tremendous support to many industries, there continues to be concern that 2021 will see increased business bankruptcies or closings that will strain loan portfolios.
Mostly though, I have been so impressed with the dedication, resilience and energy you and all of your teams brought to the debacle that was 2020. We have worked to stay in close contact with all of you and have appreciated your willingness to engage with us about everything from foreclosures, to lending programs, to daily operations. We look forward to continued communication and partnership in 2021 and are hopeful it will be less eventful and significantly less stressful than 2020.
Melanie G. Hall, Montana Commissioner of Banking and Financial Institutions