Thirty Years Give or Take VI: I Become North Carolina Commissioner of Banks
Some setting of the stage. Bear with me please.
In June 2002, I was nominated to serve as North Carolina Commissioner of Banks, with confirmation from both Houses of the General Assembly following later that year. The ten eventful years that followed will be the subject of several upcoming posts, but first, let's establish some context.
The Office of the North Carolina Commissioner of Banks (NCCOB)
NCCOB is an independent state government agency that is responsible for the chartering and regulation of North Carolina's state banks, trust companies, and mortgage companies, as well as registration and licensing of various financial institutions operating in North Carolina.
Led by a Commissioner and overseen by a State Banking Commission chaired by the State Treasurer, NCCOB maintains financial independence from the legislative budget process. Rather than relying on tax revenues or legislative appropriations, the agency is funded through bank assessments and fees paid by non-bank firms. While financially independent, NCCOB remains subject to oversight by the State Senate and House of Representatives.
NCCOB's Three Core Functions
NCCOB fulfills three distinct yet interconnected functions:
Supervision: Conducting oversight through periodic examinations, issuing regulations, and providing guidance related to such oversight.
Regulation: Licensing, issuing rules and regulations, and performing compliance examinations.
Enforcement: Investigating legal or regulatory violations and taking appropriate actions, either through administrative proceedings or referrals to law enforcement agencies.
How these functions apply varies depending on the type of financial institution involved.
Different Approaches for Different Entities
Banks operate as institutions impressed with the public interest. Under North Carolina law, conducting banking business requires NCCOB licensure and ongoing supervision. As I'll discuss in future posts, bank regulation is coordinated with Federal banking supervisory and regulatory agencies with whom NCCOB shares jurisdiction over state-chartered banks. Enforcement typically proceeds through administrative channels unless serious legal violations occur.
Non-bank financial institutions also operate under NCCOB-issued licenses and undergo regulatory examinations and enforcement. The key difference: banks receive supervisory treatment focused on ensuring their safety and soundness, while non-banks experience more of a "cops on the beat" approach designed to prevent consumer harm.
My Initial Vision
At my swearing-in ceremony marking the commencement of my first full term as Commissioner in 2003, I defined NCCOB’s mission to be promotion and maintenance of the strength and fairness of the North Carolina financial services marketplace. I went on to outline several priorities:
Modernizing North Carolina's banking laws and bank supervisory framework
Enhancing enforcement of the North Carolina Mortgage Lending Act
Encouraging best practices in the mortgage and consumer finance industries
Enhancing services to underserved low-income communities, particularly the unbanked and underbanked
As the upcoming posts will reveal, events would soon overwhelm these well-intentioned plans.