Administrative Report to the Governor
1997-1998
Agency Mission | Statutory Responsibility | Public Service
Improvements/Achievements | Reducing Waste
Strategic Planning | Equal Employment Opportunity/Affirmative Action
Department At A Glance:
Commissioner - John P. Burke
Established - 1837
Statutory Authority - Titles 36a and 36b,
Connecticut General Statutes, and Related Laws
Central Office -
260 Constitution Plaza
Hartford, CT 06103-1800
Average number of full-time employees - 145
Recurring operating expenses, 1997-98 - $12,240,620
Organization Structure:
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The mission of the Department of Banking is to ensure the safety and soundness of the depository institutions it regulates, and to administer and enforce the state's banking and related laws, with the ultimate goal of protecting Connecticut's consumers.
The Department of Banking is responsible for the regulation and examination of financial institutions and various related entities chartered, licensed or registered by the state. The banking commissioner is charged with administering the banking and credit union laws of the state as well as the laws regarding securities, tender offers and business opportunities. The banking commissioner also administers the Truth-in-Lending Act and other consumer credit laws and a major portion of the law concerning rental security deposits.
Specific regulatory functions are assigned to divisions within the department.
The Bank Examination Division is responsible for the supervision of state-chartered bank and trust companies, savings banks and savings and loan associations. This division also supervises bank holding companies, licenses money forwarders and check cashing services, and has responsibility for analyzing applications for new charters, acquisitions, mergers, branches and changes in corporate structure.
The Credit Union Division supervises state-chartered credit unions. It has responsibility for analyzing applications for new charters, mergers, requests for field of membership expansion and changes in corporate structure.
The Consumer Credit Division is responsible for the enforcement of Connecticut’s laws concerning small loan companies, sales finance companies, debt adjusters, first mortgage lenders and brokers, secondary mortgage lenders and brokers, consumer collection agencies, Truth in Lending and other consumer credit laws.
The Securities and Business Investments Division is responsible for the registration of securities and business opportunity offerings for sale in Connecticut; the registration of broker-dealers and investment advisers, along with their agents and branch offices; the examination of broker-dealer, investment adviser and branch office registrants; and enforcement of the state’s securities, business opportunity and tender offer laws.
The department’s customers include the general public, representatives of the public, regulated entities and consultants. The public at large, including depositors, borrowers, investors, landlords and tenants, and others who use the services of regulated financial entities, benefits broadly from agency activities. Agency services help protect public funds in depository institutions, offer important investor and consumer protections, assist in dispute resolution and provide valuable public information.
Representatives of the public, including the Governor and the General Assembly, other elected and appointed officials and federal, state and municipal agencies, receive information, advice, proposed legislation, case referrals and other important services from the department.
Financial entities are subject to regulatory oversight.
Consultants, including laws firms, accounting firms, consumer advocacy groups, trade associations and others, receive information, advice, policies and guidelines from the department.
The Department of Banking is committed to maintaining a standard of excellence in meeting its regulatory responsibility, while being responsive to Governor Rowland's desire to make Connecticut business friendly.
As a basic, fundamental part of its mission, the department is strongly committed to assisting the public in interfacing with financial institutions in Connecticut and in assisting with complaints and dispute resolution. Consumers are urged to contact the department whenever they may need assistance in dealing with financial institutions. Individual divisions stand ready to promptly assist consumers with issues involving banks, credit unions, mortgage lending and other consumer credit matters, rental security deposits, and matters relating to securities and business opportunity investments.
As a means to provide convenient access to information seven days a week, 24 hours a day, the department maintains a home page on the Internet at http://www.ct.gov/dob. During 1997-98, the department significantly expanded the web site's content to over 300 linked files and continued to update information on a nearly daily basis.
The Bank Examination Division continues to emphasize training and efficiency in an effort to provide adequate supervision while minimizing the regulatory burden on state-chartered depository institutions. Division examiners are utilizing off-site means to monitor the condition of institutions and prepare for safety and soundness examinations.
Technology continues to drive both the domestic and global economy. The financial services industry was among the first to computerize and it still benefits greatly from technological advances. Division examiners are using technology to lessen examination time and to more efficiently perform examination and administrative responsibilities. The Division has made efficient use of technology in the supervisory process by accessing national networks and using various software tools developed between state and federal agencies. The Division will continue to integrate technological advances into its business processes to benefit both the department and the banking industry.
During the year, the Consumer Credit Division posted its license applications on the Internet. By doing so, prospective applicants can immediately obtain license applications without delay, day or night. In addition, the division makes available on the agency's web site current lists of all its licensees. These lists are valuable for consumers and members of the business community to determine whether a particular entity is licensed with the department.
The Credit Union Division updated its examination software during 1997-98. The division also intensified its oversight of credit unions' progress in preparing for the "Year 2000" date change. Management continued the practice of rotating knowledgeable, experienced examiners into the office to assist with operational issues and in addressing consumer inquiries. Division examiners also participated as speakers in several industry seminars.
The Legal Division added two attorneys to its staff who are involved in prosecuting and hearing administrative cases before the agency, involving actions taken against persons and entities who have violated laws within the Department's jurisdiction, and which involve public welfare and safety.
The Legal Division continued to provide the public and regulated entities with current compilations of the statutes and regulations within the jurisdiction of the Department of Banking and certain other related statutes. These compilations are periodically revised as necessary to reflect legislation enacted by the General Assembly or changes in regulations. They are available for free access on the department's web site.
As a source of information for consumers and investors, the Legal Division has also started to post copies of final administrative orders related to consumer credit or securities and business investments matters on the agency's web site.
A major goal of the Securities and Business Investments Division is to foster a healthy, competitive business environment by protecting the public from securities and business opportunity-related frauds and other abuses that hinder legitimate enterprises in raising needed capital. The division continued to pursue this goal in 1997-98, reallocating resources in light of The National Securities Markets Improvement Act of 1996 ("NSMIA"). NSMIA preempted state securities regulation of larger investment advisers and of mutual funds and made other amendments to the federal securities laws, stressing the need for national regulatory uniformity. As a result of NSMIA, the division has been compelled to redeploy staffing, and direct its efforts primarily to the areas of licensing, examination and enforcement.
The Securities Division placed renewed emphasis on increasing its accessibility to the Connecticut investing public, the securities industry and other interested groups during 1997-98. A Securities Advisory Council, composed of industry representatives, academics and members of the bar, all of whom served without compensation, offered insight on new regulatory initiatives. The division also continued to work with companion regulators at both the state and federal levels to ensure a consistent, even-handed approach to regulation.
Personalized attention continued to be provided to new applicants for broker-dealer and investment adviser registration based in Connecticut through tailored "pre-registration meetings." Potential registrants were briefed on their compliance responsibilities, advised on what to expect during a division examination and afforded an opportunity to question staff. Similarly, small issuers seeking to raise capital in the state were encouraged to meet with staff to walk through the process of complying with securities law requirements.
With the enactment of NSMIA, greater attention was placed on enforcement and fraud prevention. Division intervention in ensuring that Connecticut investors receive rescission and restitution remained a primary objective, as did the disgorgement of ill-gotten gains by violators of the state's securities laws. In addition, the division continued to encourage dialogue with broker-dealers experiencing compliance and operational difficulties, and required that they file periodic status reports until the problems were resolved.
The division strives to keep its personnel apprised on key regulatory developments through internal and external training programs, frequent staff meetings and staff input into the decision-making process. Cross-training efforts have enabled division staff to be flexibly assigned to critical work tasks.
The Banking Department places a high priority on outreach to the public. The banking commissioner and staff frequently address consumer, industry, student and other groups throughout the state. The department also undertakes various educational efforts to help the public understand services provided in the financial marketplace and recognize fraudulent investment offers. A report on the financial condition of depository institutions is published annually; a weekly Bulletin provides information on applications before the agency and intended changes in regulations; a Securities Bulletin is published quarterly to update industry on the latest regulatory developments; and investor education and other publications are produced.
Improvements/Achievements 1997-98
Commissioner John P. Burke took office as Chairman of the Conference of State Bank Supervisors (CSBS) at the organization's annual meeting in May 1998. CSBS is the professional association of state officials responsible for chartering, regulating and supervising the nation's state-chartered banks and state-licensed branches and agencies of foreign banks. Commissioner Burke is the first banking commissioner from Connecticut to serve as chairman of the national group, which was created in 1902. He will serve a one-year term.
The Bank Examination Division was awarded a prestigious certificate of reacreditation from CSBS in May 1997. Each year, CSBS reviews the Division's accreditation, evaluating both organizational and personnel changes. A review team of veteran state and federal regulators may make various recommendations and the division, to the extent possible, implements such recommendations.
CSBS accreditation recognizes state banking departments that demonstrate a high level of competence and quality. The process begins with a self-evaluation questionnaire that reviews all aspects of the department's operations: its mission, policies, procedures, funding and statutory authority. The review team next visits the department to determine whether it can effectively fulfill its responsibility of chartering, regulating and supervising the state's banks and bank holding companies. The review team reports its findings and makes a recommendation to CSBS's Performance Standards Committee, which votes on the final accreditation decision.
Each year the department, with the coordination of the Government Relations and Communications Division, conducts an active legislative program. During the 1998 legislative session, seven proposals concerning banks and securities were submitted to the General Assembly and were subsequently enacted into law. One proposal concerning bank applications streamlines certain procedures involving banks in organization and provides the Commissioner with flexibility in approving mergers and conversions. It also gives the Commissioner authority to hold hearings in connection with any application or matter within the agency's jurisdiction. Another proposal provides the Commissioner with authority to examine data processing vendors used by banks to assess whether banks' data is being appropriately handled and whether the confidentiality of customer information is being maintained. Such examination authority is also vitally important in determining whether banks' data processing systems are adequately prepared for the "Year 2000" date change.
In 1997, the department participated in a cooperative venture between banks and social service agencies in response to a call from Governor Rowland for state commissioners to assist with welfare reform. The agency helped support the Greater Hartford Partnership Program in sponsoring a Jobs First initiative to assist welfare clients in entering or re-entering the workforce. During the fiscal year, a program participant received on-site training and became a permanent employee in the agency's Business Office.
The Business Office introduced a new budget iteration process to develop divisional budgets which were, in turn, used to prepare the agency's overall budget. The new procedure provides stronger senior management accountability in the budget development process. The department also revised its use of financial instruments for determining whether assessments would be needed from state-chartered banks and credit unions for department operations. The change provided the Banking Commissioner with more meaningful information in making a decision on assessments.
In addition, the Business Office strengthened internal controls for developing accountability reports and for paying vendor invoices. A procedure was also instituted for ordering office supplies from a contract vendor electronically rather than through paper forms. An internal newsletter was distributed by the Business Office to inform staff of various activities and their effect on the delivery of service to customers.
The Consumer Credit Division revised various license applications for the purpose of clarifying certain areas of the applications that generated a high percentage of deficiencies. The revisions have resulted in a more timely application review process.
In the area of handling consumer complaints, reimbursements to consumers resulting from division assistance and intervention increased by over 21% from the previous fiscal year.
On October 28, 1997, the Department of Banking, in conjunction with the Federal Reserve Bank of Boston and the Connecticut Coalition for Consumer Education, sponsored an informational conference during National Consumers' Week. "Consumer Rights/Consumer Rip-Offs: More of What You Need to Know" provided approximately 100 consumer professionals and advocates with valuable information on changes in state and federal regulations. In addition, speakers talked about how to recognize and avoid Internet scams and identity fraud.
The Credit Union Division was awarded the prestigious distinction of being re-accredited as a State Credit Union Supervisory Agency by the National Association of State Credit Union Supervisors ("NASCUS") in 1996 for continued excellence and leadership. During 1997-98, as part of the continuing accreditation process, the division satisfactorily completed an annual NASCUS review.
The Personnel Office continued to offer training to department employees to improve their skill and job performance. During 1997-98, employee courses were offered in customer service and communications skills training. Managers also attended leadership development training that focused on teambuilding and coaching for maximum performance.
In recognition of outstanding customer service, an employee in the Legal Division received one of the inaugural Governor's Service Awards presented by Governor Rowland in August 1997.
As a positive, proactive approach to fostering a work environment that respects diversity of all types, the Personnel Office provided half-day diversity awareness training to every agency employee. The sessions were planned so that the skills and talents of all employees might be fully utilized and so employees will be able to respond effectively to the agency's diverse local, national and international customer base.
The Securities Division continued its cooperation with other jurisdictions in combating the high-pressure sales tactics and unlicensed activity frequently associated with low-priced, micro-cap stock sales. The division's rigorous investigative process resulted in several administrative actions against brokerage firms and their agents, and heightened public awareness of improper practices in the stock market.
Throughout 1997-98, the division continued its active role in the North American Securities Administrators Association, thus ensuring that Connecticut securities regulation was responsive to new developments and uniform with that of other jurisdictions.
The department's joint participation with other agencies and self-regulatory organizations in various enforcement database systems proved instrumental in enhancing agency enforcement efforts.
During 1997-98, the division continued to rely on the Internet as an enforcement and research aid. Participation with the Federal Trade Commission in "surfing" the Internet for business opportunity frauds and other illegal activity enabled the division to deter misconduct before it could financially harm state residents. The division also continued its active participation with other states in developing uniform standards for the regional review of certain securities offerings. Those offerings consisted of small issues of up to $5 million registered via the Small Corporate Offering Registration (SCOR) or made pursuant to federal Regulation A. The department also adopted an accredited investor exemption from securities registration which greatly facilitated the ability of venture capitalists to find investors through traditional avenues and electronic means such as ACE-NET.
In October 1997, the Securities Division sponsored its ninth annual Securities Forum. Approximately 360 securities industry professionals and others attended the daylong conference. Through a series of breakout seminars and general session presentations, Securities Forum '97 fostered an open dialogue with regulated individuals and entities and encouraged the free interchange of ideas.
In May 1998, the division locally sponsored the broadcast of a national teleconference on investigative sources of information which was attended by numerous regulatory and enforcement agencies. Topics included the use of the Internet and various databases to investigate and prosecute white-collar crime.
The Department of Banking continually reviews agency operations to improve efficiency, reduce costs and foster innovation.
The banking commissioner actively encourages employee suggestions and recommendations regarding the department's policies, procedures and practices, with the goal of identifying any inefficient or redundant operations and simplifying government.
The Business Office has streamlined its workflow and procedures to improve efficiency. The use of paperless systems has resulted in the purchase of fewer paper forms and has eliminated certain manual processing steps. The Business Office estimates that these changes have achieved a rate of return on work effort of 3%, allowing approximately $13,500 of personnel services costs to be devoted to other tasks serving department and customer needs.
The Consumer Credit Division made improvements to its licensing and examination function which have resulted in more efficient operations. In the examination area, a tracking database was implemented that automatically generates correspondence related to examinations reducing processing time. With regard to licensing, the division has saved on labor, copying and postage costs by making its applications available over the Internet to prospective applicants who choose to download such forms.
The Legal Division has instituted a process of reviewing publications to determine whether the continued subscription to such publications is warranted. The process, which involves the circulation of a publication subject to renewal among attorneys for their review and interest in continuing the subscription, has realized approximately $550 in savings since the process was instituted in early 1998.
The Securities Division continued to explore ways automation might be used to increase efficiency and eliminate waste. Working with the agency's MIS Division, the Securities Division took steps to develop a new integrated licensing database. In addition, the division continued to monitor testing of the nationwide computerized Securities Registration Depository ("SRD"). This database would enable securities issuers to make one-stop streamlined registration filings with individual states and the SEC through the Internet.
The Securities Division has also been actively providing meaningful advice to state and federal regulatory bodies on how the Central Registration Depository ("CRD") can be improved. The CRD is an automated system administered by the National Association of Securities Dealers and is used for the multi-state licensing of broker-dealers and their agents. CRD is currently undergoing a design overhaul that promises to speed up staff processing time on applications. In addition, a proposal is pending to use the Internet as a way to bolster CRD's utility as a licensing and informational tool. The division has also continued its practice of establishing informal benchmarks to ensure that there are no unnecessary delays in the processing of registration and licensing applications.
In the securities registration area, reviewed material is sent to off-site storage promptly after critical data has been entered in the computer system, minimizing the need to create and maintain paper file folders in-house.
In striving for continued excellence in regulation, the agency devotes considerable effort to strategic planning.
Senior managers and key department employees during 1997-98 continued the comprehensive process of analyzing agency work flow and activity as part of the development of a Department of Banking Integrated Information System ("DBIIS"). The Management Information Systems Division, building on such planning, is now completing the first phase of programming for DBIIS.
In addition to agency level planning, the Bank Examination Division managers prepare a strategic plan annually. The plan reflects developments in the regulatory and industry environment and defines the Division's operational focus. The dynamic change taking place in an ever faster-paced and information-rich world will pose new challenges in future Division planning.
The Business Office continues to explore ways to increase its rate of return on work effort in providing quality accounting services, while proactively looking for ways to eliminate waste.
Management of the Consumer Credit Division regularly meets with division staff to discuss ways to improve workflow and office procedures and the performance of individual staff duties. In addition, division staff are encouraged to submit suggestions regarding possible changes to business processes that might increase the division's efficiency and effectiveness.
Securities and Business Investments Division management, with staff input, routinely meets to strategically plan operational improvements. General objectives are periodically established and re-evaluated by management to ensure their success.
During 1997-98, the Securities Division dedicated more of its resources to enforcement and examination activities in light of NSMIA. For example, the division significantly shortened its examination cycle for Connecticut-based investment advisers. In addition, greater emphasis was placed on investment adviser qualification standards. Evolving federal policies and procedures continue to present a challenge as the financial services industry becomes more national and global in scope. The division will continue to work with other states in developing a more uniform system governing investment adviser registration. The division also expects to use its participation in shared complaint database systems to bolster its enforcement program.
Equal Employment Opportunity and Affirmative Action
The Department of Banking is totally committed to providing equal employment opportunity on the basis of merit; to assuring nondiscrimination; and to implementing affirmative action and contract compliance, as required by sections 46a-60, 46a-68, 46a-70 and 46a-71 of the Connecticut General Statutes. The department's annual Affirmative Action Plan, approved by the Commission on Human Rights and Opportunities, reflects significant achievement in attaining a diverse workforce reflective of the institutions the agency regulates and the customers the agency serves.
As a regulatory agency, the Department of Banking takes every appropriate action within its statutory authority to promote equal opportunity in mortgage lending, consumer credit and other financial services.
The department continues to pursue aggressive and innovative outreach strategies through its use of high school and college student internships that provide a meaningful entry into the workforce and exposure to state service.