CSBS Blog: Networked Supervision “Makes Us All Better”

“Networked Supervision makes us all better!”

Jeff Peterson is not shy about saying that up front. The senior financial services examiner is an enthusiastic supporter of the innovative supervisory approach that enables states to pool resources and expertise, streamlines the examination process for financial services companies, and offers greater protections to their customers.

During his seven years with the Nebraska Department of Banking and Finance’s Consumer Financial Services division, Jeff has seen the number of nationwide mortgage companies operating in the state soar. In many states, such rapid growth can challenge industry oversight, especially when coupled with an increase in cybersecurity threats to businesses and their customers.

Networked Supervision, as deployed through the One Company, One Exam program, enhances coordination among state regulators, increases confidence in the work done by fellow state supervisors, and offers improved efficiency that leverages expertise across the state system.

“One Company, One Exam”
Launched by the Conference of State Bank Supervisors (CSBS) in 2021, One Company, One Exam is the result of collaboration with and among state examiners.

The process brings together a team of supervisors drawn from multiple states to conduct a single examination of a nationwide financial services company. The resulting report of examination may be leveraged by other states as the basis for their own supervisory work.

It allows states to combine resources and tap one another’s expertise, a key consideration for smaller states like Nebraska. Networked Supervision produces multistate exams that Jeff can use as a complement to the division’s work.

“We have approximately 200 mortgage lenders that do business in Nebraska,” explains Jeff. With the One Company, One Exam process in place, I have a team of 50 states all working together.”

Networked Supervision in Action
Jeff’s first exposure to the One Company, One Exam program for mortgage companies came shortly after the multistate exam protocol was initiated. That experience provided key lessons about the need to streamline the process. Initially, he says, “We bit off a little more than we could chew.” The sheer number of examiners involved made the exam “almost too overarching.”

One takeaway was to limit the number of states that participate in the One Company, One Exam process to approximately 10, while still providing other interested states the opportunity to accept and leverage the exam. Another was to perform separate, targeted examinations of origination and servicing activities.

Central to each multistate exam team is the examiner-in-charge (EIC), a role Jeff was asked to fill this past year during the review of a large mortgage lender with operations nationwide. His 27-member team included colleagues from 12 states.

The EIC assigns “areas of review” based on the experience and strengths of each team member or state.

“Normally, we [Nebraska] like to do the financials. Another state may take cybersecurity. We break out pieces of the compliance management system as well,” says Jeff, pointing to the deep familiarity with state laws and federal requirements required to get the job done.

In making his assignments, Jeff encourages mentorship by pairing less experienced examiners with more seasoned team members.

“It helps the flow and helps those newer examiners get their feet wet on an exam – because it is a detailed process to learn,” Jeff noted.

The full exam process can take six to eight months, including the time it takes to plan and scope the exam, organize the team, formulate data requests, have the company reply, conduct examination work and arrange on-site meetings for the examiners, and then to write, review, and finalize reports and receive formal responses from the company.

As EIC, Jeff served as the vital single point of contact for the company. Before One Company, One Exam, a company could be inundated by multiple requests from different states, and in some cases for the same material.

“Having that primary point of contact not only with the company, but within our group makes the flow of information so much better,” Jeff explains…Read more

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