Department of Banking
JOHN P. BURKE, Commissioner
Alan J. Cicchetti, Deputy Commissioner
Established – 1837
Statutory authority – CGS Titles 36a and 36b, and Related Laws
Central office - 260 Constitution Plaza,
Hartford, CT 06103-1800
Number of full-time employees - 103
Recurring operating expenses - $13,134,316
Organizational structure - Administrative Division; Bank and Credit Union Regulation Division; Consumer Credit Division; Securities and Business Investments Division.
The mission of the Department of Banking is to ensure the safety and soundness of the depository institutions it regulates; to administer and enforce the state's banking and related laws; to assist citizens in transactions with financial institutions; and to promote economic growth through capital formation while simultaneously protecting investors against fraudulent practices that undermine the integrity of the securities markets.
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. The division also licenses foreign banking organizations that establish and maintain representative offices, agency offices or branch offices in Connecticut. The division supervises bank holding companies, and has responsibility for analyzing applications for new bank charters, acquisitions, mergers, branches and changes in corporate structure. In addition, the division licenses money forwarders, check cashing services, business and industrial development corporations, and certain non-banking corporations that exercise fiduciary powers.
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 protect public funds in depository institutions, offer important investor and consumer protections, assist in dispute resolution and provide helpful 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 law firms, accounting firms, consumer advocacy groups, trade associations and others, receive information, advice, policies and guidelines from the department.
The Department of Banking is strongly committed to maintaining a standard of excellence in meeting its regulatory responsibility, while being responsive to Governor Rowland’s desire to promote a business friendly climate in Connecticut.
As a fundamental part of its mission, the department is committed to protecting Connecticut citizens in transactions with financial institutions, as directed by state law, and in assisting with complaints and dispute resolution. Consumers are encouraged to contact the department whenever they need assistance in dealing with financial institutions. Agency employees will 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.
During the fiscal year, the amount of adjustments and reimbursements that were obtained on behalf of consumers from the Consumer Credit Division's complaint function increased significantly from the previous fiscal year. It increased from $1,326,918 to $2,238,632, an increase of approximately 69 percent. The increase is approximately 15 percent from the $1,939,066 generated during the 2001-2002 fiscal year.
During the period, a requirement of registration and standards for registration applicable to individuals that take mortgage applications from consumers were enacted. Registration will enable the department to better monitor the activities of individuals that take mortgage applications from consumers and to initiate enforcement action when there is non-compliance with the standards for registration.
Also, during the fiscal year, the division participated in a multi-state investigation and enforcement action, which resulted in a settlement agreement wherein the respondent agreed to refund $6,052,060 to its Connecticut consumers.
During 2002-03, the Securities and Business Investments Division intervention resulted in the return of almost $2 million to the investing public. Also, the division imposed approximately $1.4 million in fines for violations of the state's securities laws. A portion of this amount was derived from settlements with securities brokerage firms resulting from a multi-state and federal investigation into the formerly widespread brokerage practice of permitting investment banking considerations to sap the objectivity of securities analysts. Globally, the settlements called for the firms to pay $1.4 billion, including penalties of $437.5 million, disgorgement of $37.5 million, payments of $432.5 million to fund independent research and payments of $80 million to fund investor education. Connecticut is expected to receive in excess of $4 million in penalties. Settlement terms also included detailed remedial mandates to ensure that conflicts of interest would not recur. With interest rates at an all-time low and declines in stock market performance evident, a greater number of investors fell prey to questionable investment schemes. Division enforcement efforts focused on promissory note sales, FOREX investments, bogus investment vehicles and misappropriation of investor monies.
The division also created, and posted to the website, fillable versions of Part II of Form ADV (the disclosure document delivered to investment advisory clients) and Form D (used by issuers seeking to raise capital in small private offerings).
Leveraging technology, the division continued to transition the records of thousands of investment advisers and their agents to the nationwide on-line Investment Adviser Registration Depository (“IARD”) administered by the NASD. Division staff held free educational seminars in Hartford and Trumbull to teach investment advisory personnel how to successfully transition to electronic filing through the IARD system.
The agency’s security deposit investigator resolved 103 landlord tenant disputes during fiscal year 2002-03 and recovered $32,879.97 for Connecticut residents who had complained to the department that landlords had unjustly withheld their refundable rental security deposits.
During 2002-2003, the Bank Examination Division opened one state-chartered bank, Connecticut River Community Bank in Wethersfield, and one foreign banking organization, Fortis Bank, a Belgium Bank, located in Stamford. At the end of the fiscal year, there were three state-chartered banks in various stages of organization: Higher One Bank (New Haven), Customers’ Bank (West Haven) and Connecticut Bank and Trust Company (Hartford).
At the beginning of the fiscal year, there were 28 outstanding customer service complaints/inquiries. An additional 2,940 complaints/inquires were received during the fiscal year. As of June 30, 2003, there were 24 outstanding complaints/inquiries. Ninety-seven percent of all written complaints/inquiries were resolved within 90 days. The diligent work of the consumer information representative, Deborah Buckley, has resulted in the successful resolution of 2,944 customer complaint/inquiries during fiscal year 2002-2003. While in the past, the Department of Banking had not tracked dollars recovered, during this past fiscal year the consumers were refunded $138,565.99.
During 2002 the Connecticut General Assembly enacted ‘An Act Concerning Credit Union Modernization’ which became effective October 1, 2002. This law is a modernization of the state statutes that govern the powers of Connecticut credit unions. Powers concerning investments, lending, fiduciary services and insurance sales were significantly expanded to allow more opportunities for Connecticut credit unions to serve their members and generate income. Since the law became effective, the Division has approached the modernization from two perspectives; first, to meet with the industry and provide information about new powers as well as obligations, and, second, to continue doing thorough examinations to ensure all credit unions are complying or taking steps to get into compliance.
The Legal Division continued to prepare current compilations of the statutes and regulations within the jurisdiction of the Department of Banking, and certain other related laws, for use by the public and regulated entities. The compilations are revised as necessary to reflect new legislation or changes in regulations, and are available for free download on the Department’s website.
The division also continued to post on the Department’s website administrative actions taken against entities within the jurisdiction of the Commissioner, as well as indexes to advisory opinions issued by the Commissioner concerning bank, credit union, consumer credit, landlord/tenant and business opportunity issues that have arisen under statutes and regulations within the Commissioner’s jurisdiction.
The department further undertakes educational efforts to help the public understand services provided in the financial marketplace and to recognize fraudulent investment offers. 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 regulatory developments; and investor education and other publications are produced as needed.
The department of Banking is committed to providing equal employment opportunity on the basis of merit; to assuring nondiscrimination; and to implementing affirmative action and contract compliance programs, as required by law. The department’s Affirmative Action Plan, approved by the Commission on Human Rights and Opportunities, reflects the agency's commitment to achieving workforce balance and fairness in all terms and conditions of employment.
Overall, total agency spending amounted to $13,134,316 which represented an under spending of $2,439,344 compared to budget. Contributing to the level of under spending were savings achieved in the areas of Personal Services/Fringe Benefits ($1,226,931) and Other Expenses ($881,302). The agency was also significantly under budget with respect to spending for equipment ($275,395). Part of the savings achieved in this area have been carried over to Fiscal Year 2003/2004, and will be used to make equipment purchases related to our MIS function.
The licensing process administered by the Consumer Credit Division was revised to increase the licensing term from a one-year term to a two-year term for all licensees. The change will increase the efficiency of the licensing process and reduce the amount of resources that licensees are required to devote to the licensing renewal process.
On November 19, 2002 the Department co-sponsored a Predatory Lending Conference that was attended by approximately 300 industry professionals. Topics discussed at the conference included state and federal predatory lending laws, credit issues, lender concerns and educational responses to predatory lending.
During the fiscal year, the division participated in several joint compliance examinations with other state regulators. The joint examinations improved the efficiency of the examinations and helped to reduce costs. The new process benefits both the entity being examined and this department. In addition, the division’s participation in a multi-state investigation and enforcement action significantly reduced the cost of the investigation and resulted in a timely settlement.
Public Act 02-111, An Act Concerning Consumer Credit And Money Transmitter Licensees, expands the current licensing requirements to mortgage correspondent lenders and originators, extends licensing terms, changes application renewal dates, adds net worth and experience requirements for mortgage licensees, and imposes a bonding requirement for debt adjuster licensees. Such provisions provide additional protection to consumers and helps make the licensing process more efficient.
The Legal Division continues to review publication subscriptions to determine whether renewal of each subscription is warranted. The division realized savings of approximately $1,700 in 2002/2003, and more than $5,100 since a review process was instituted several years ago. In addition, the division has changed the company it uses for online legal research. Previously, the division used an online legal research service that charged for the time a user was online as well as for each transaction performed by the user. In 2002/2003, the division started using a competitive online legal research service that has given a limited number of users, for a fixed price, access to vast resources for an unlimited amount of time and for an unlimited number of transactions. Between October 2002 and May 2003, the division has realized savings in excess of $17,500.
The Advisory Committee on International Banking met in 2002 during which the Department of Banking staff discussed proposed changes to the Asset Pledge Requirements for Foreign Banking Organizations.
In September and December 2002, the department held two Bank Directors’ Training Conferences. These one-day sessions provided bank directors with practical information to assist them in their director roles and the board in its role for operating the bank safely and soundly for continued future success and profitability. The program included such topics as responsible corporate governance, common sense accounting practices, economic trends and banking climate overview, Washington update, contingency planning, compensation strategies, and talking with the regulators.
The Bank Examination staff produces a quarterly report, the DeNovo Report, for use by Bank management and Boards of Directors, industry representatives and consultants. The report provides a comparative view of the denovo banking activity in Connecticut.
In an effort to further reduce regulatory burden, the Bank Examination Division is now accepting the Interagency application form for starting a new bank. This application process provides the bank organizers to complete a single application to be utilized by both the State of Connecticut Department of Banking and the federal regulators. The division continues to seek ways to further streamline the application process and reduce regulatory burden for the institutions it regulates and/or licenses.
The Credit Union Division has adopted a risk-focused examination approach. Credit Union Division examiners now concentrate resources on areas determined to have the most risk, such as asset quality, liquidity or asset–liability management. Normally, a thorough examination is conducted at least once each year, however, if changes are noted in a credit unions condition during the year an examination targeting certain areas is completed.
Ralph Lambiase, Director of the Securities and Business Investments Division, was voted President-elect of the North American Securities Administrators Association ("NASAA"), becoming NASAA President for a one-year term in September 2003. Organized in 1919 and dedicated to investor protection, NASAA is a voluntary association whose membership consists of 66 state, provincial and territorial securities administrators in the 50 states, the District of Columbia, Canada, Mexico and Puerto Rico. The division is assisted by a Securities Advisory Council, comprised of industry representatives, academics and members of the bar, all of whom serve without compensation, that offers the Commissioner and staff insight on new regulatory initiatives.
On October 7, 2002, the department held its annual Securities Forum in Cromwell, Connecticut. Presentations by department speakers, Securities Advisory Council members and others kept securities industry members abreast of critical regulatory and compliance developments.