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The recent unexplained departure of state banking Commissioner Terence McGinnis from the Massachusetts Division of Banks opens the door to a new leader and a potential policy shakeup.
Merrily Gerrish, general counsel and deputy commissioner at the division, is currently filling the void as acting commissioner, but a spokesperson at the division said an announcement would be made once a permanent commissioner is appointed.
While the commissioner is largely responsible for day-to-day duties and ensuring the stability of state financial institutions, experts say there will be opportunities to frame policy and continue initiatives in fintech, the Community Reinvestment Act (CRA) and streamlining compliance.
“The commissioner is the bully pulpit for financial institutions and policymakers,” Thomas Curry, a partner at the law firm Nutter and two-time former Massachusetts banking commissioner, told Banker & Tradesman. “You are listened to, especially when talking about the stability of the financial system and the solvency of individual banks.”
McGinnis’ Contributions
Curry lauded McGinnis for his time at the division and said he hopes the next commissioner has similar experience and knowledge.
Although he was only in office for two years, McGinnis played a crucial role in continuing and establishing policy initiatives, said Jon Skarin, executive vice president at the Massachusetts Bankers Association.
Gov. Charlie Baker tasked McGinnis’ predecessor, David Cotney, with streamlining state banking regulations in 2015, a process that continued into McGinnis’ tenure.
This involved updating and modernizing outdated regulations, eliminating unnecessary ones and adapting others to account for changes in technology. These regulations did not just revolve around banks and credit unions, but also encompassed check cashiers, non-depository licensees and ATM operators.
“The division went through a very comprehensive process at the time,” Skarin said.
Outgoing Commissioner of Banks Terence McGinnis
Skarin also said McGinnis put a lot of emphasis on addressing elder abuse issues and providing fintech resources to financial institutions.
The division, along with the Executive Office of Elder Affairs, the Office of the Attorney General, Massachusetts Bankers Association and the Cooperative Credit Union Association, relaunched training materials to assist banks and credit unions in detecting and preventing elder financial abuse.
A little over a year ago, the division selected one of its deputy commissioners, Paul Gibson, to be the point man for fintech matters, giving financial institutions a clear place to go for fintech-related issues.
When banks had questions on related issues, they would contact Gibson, who would corral the resources within the division to help financial institutions overcome obstacles they might be facing at the time.
What Might Be Next
Curry said he believes the next commissioner will have an opportunity to play an important and meaningful role in furthering the development of technology initiatives.
For fintech, that means fostering an environment where there is an openness to responsible innovation and new ways of providing financial services, he said.
One specific initiative, according to Curry, is to take a page from Arizona, which earlier this year became the first state in the country to create a so-called regulatory “sandbox” for fintech products.
The sandbox allows startups, entrepreneurs and even established companies to apply to launch products on a limited, temporary scale to certain consumers. This allows the companies to test innovative products, services, business models and delivery mechanisms in the real market without incurring the regulatory costs and burdens that would otherwise be imposed. The Arizona Attorney General’s Office administers the sandbox.
The next banking commissioner could also play a role in developing technology that streamlines regulations, or regtech.
“There is a lot talk now about trying to use artificial intelligence and machine learning,” Curry said, referring to the Bank Secrecy Act and anti-money laundering rules, which can be a huge regulatory burden on financial institutions. “How can tech help regulators and the regulated comply with some very complex data as it relates to regulatory requirements?”
Bram Berkowitz
The new commissioner may also turn his or her attention to reforming the CRA, Skarin said.
The U.S. Office of the Comptroller of the Currency at the end of August published an advanced notice of proposed rulemaking, calling for public comment on ways to modernize and transform the CRA.
Massachusetts is one of a handful of states in the U.S. that has its own CRA requirements in addition to federal CRA requirements.
A modernization of the CRA would trigger a review of the new federal requirements and an examination of whether state regulations also need to be revised – a task that would fall to the state’s banking commissioner, whomever that may be.
