Department of Banking
JOHN P. BURKE, Commissioner
Alan J. Cicchetti, Deputy Commissioner
Established - 1837
Statutory authority - Titles 36a and 36b, CGS and Related Laws
Central office - 260 Constitution Plaza,
Hartford, CT 06103-1800
Average number of full-time employees - 108
Recurring operating expenses - $13,488,186
The mission of the Department of Banking is to protect users of financial services from unlawful or improper practices by requiring that regulated entities and individuals adhere to the law, assuring the safety and soundness of state chartered banks and credit unions, educating and communicating with the public and other stakeholders, and promoting cost-efficient and effective regulation.
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 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, money transmitters and issuers of money orders or travelers checks, check cashing services, Truth-in-Lending and other consumer credit laws.
The Financial Institutions Division is responsible for the supervision of state-chartered bank and trust companies, savings banks, savings and loan associations and credit unions. The division also licenses foreign banking organizations that establish and maintain representative offices, agency offices or branch offices in Connecticut, and supervises bank holding companies. It has responsibility for analyzing applications for new bank or credit union charters, acquisitions, mergers, branches, changes in corporate structure, and credit union field of membership expansions. In addition, the division licenses business and industrial development corporations and certain non-banking corporations that exercise fiduciary powers.
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 Rell’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 consumer 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 2003-2004 fiscal year, the department obtained $1,957,728 in adjustments and reimbursements on behalf of consumers. Examiners in the department’s Government Relations and Consumer Affairs Division handled 17,853 telephone inquiries and 2,718 written complaints from consumers during the period.
The public also received restitution totaling $818,000 pursuant to a settlement agreement and as a result of licensee examinations conducted by the Consumer Credit Division.
Intervention by the Securities and Business Investments Division during the fiscal year resulted in restitution and rescission offers to the investing public totaling close to $4,379,000. The division also imposed $3,281,928 in fines for violations of the state's securities and business opportunity laws. A portion of this amount was derived from settlements with securities brokerage firms and others resulting from a continuing multi-state and federal investigation into the formerly widespread brokerage practice of permitting investment banking considerations to undermine the objectivity of securities analysts.
In addition, the agency's security deposit investigator resolved 256 landlord tenant disputes in the fiscal year and recovered $95,307 for Connecticut residents who had complained to the department that landlords had unjustly withheld their refundable rental security deposits.
One new state-chartered bank, The Connecticut Bank and Trust Company, opened for business during 2003-2004. The bank’s main office is located in Hartford, and it operates branches offices in Glastonbury and West Hartford. Three state-chartered banks were in various stages of organization at the end of the fiscal year: Higher One Bank (New Haven), The Bank of Southeastern Connecticut (New London) and the Darien Rowayton Bank (Darien).
The Financial Institutions Division sponsored a Bank Directors' Training Conference for board members and CEOs in June 2004. The one-day meeting offered bank directors practical advice to assist in meeting their institutions’ regulatory responsibilities and in overseeing their banks’ safe and sound operation and business profitability. Topics included bank codes of ethics, responsible corporate governance, participation on interest rate risk and asset liability committees, duties of an audit committee, performance evaluations and communicating with regulators.
The Financial Institutions Division produced a quarterly “DeNovo Report” for the benefit of bank executives and Boards of Directors; industry representatives; and consultants. The report provides a comparative view of the performance of new banks in Connecticut.
Each year the department, with the coordination of the Government Relations and Consumer Affairs Division, conducts an active legislative program. During the 2004 legislative session, five department proposals concerning banks, consumer credit and securities were enacted into law.
In cooperation with the Consumer Credit Division, new legislation was drafted and enacted as Public Act 04-10 changing the mortgage rate lock-in process. Borrowers are now better protected as issuers of rate locks must provide them with a written or electronic confirmation. As a result of these changes, the Department will be better able to settle rate lock issues on behalf of affected consumers.
Another important bill, Public Act 04-136, addresses issues concerning banks in receivership, including requiring trust and uninsured banks to maintain at least $1 million in assets on deposit for the benefit of the banking commissioner for use in a receivership, if necessary, and protecting client interests in receiverships and conservatorships. It also allows certain out-of-state banks with Connecticut branches to establish additional branches without following the statutory process.
In addition, Public Act 04-23, a joint compromise between the Department, the legislature and industry, codifies procedures that mutual savings banks must follow when converting to capital stock banks.
The Legal Division prepared compilations of the statutes and regulations within the jurisdiction of the Department of Banking, and certain other related laws, for the benefit of regulated entities and the public. 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 posted 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.
Beyond its participation in the aforementioned multi-state and federal investigation of brokerage firms’ practices concerning securities analysis, the Securities and Business Investments Division focused its enforcement efforts on misappropriation schemes, nontraditional investments luring investors with promises of high yields; misleading business opportunity ventures; and unlicensed “finders” of investors.
Leveraging technology, the Securities Division implemented a program for the online renewal of investment adviser and investment adviser agent registrations through the nationwide Investment Adviser Registration Depository (“IARD”) administered by the NASD, thus easing compliance by registrants and reducing paperwork. The Division also eliminated a duplicative requirement that registered broker-dealers not experiencing capital difficulties file additional copies of their financial statements at the state level in addition to filing federally.
As a means to provide the public with convenient 24-hour access to department information, application forms and educational resources, the department maintains a Website on the Internet at www.state.ct.us/dob. During 2003-2004, approximately 350,000 visitors viewed over 1.24 million pages on the agency Website.
The department emphasizes educational efforts to help the public understand financial services offered in the marketplace and 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.
The Department reorganized several of its business units in February 2004 to improve its organizational efficiency and customer service.
Separate Bank Examination and Credit Union Divisions were merged into one division overseeing depository institutions and other entities, a new Financial Institutions Division. The new division’s director now reports directly to the Banking Commissioner.
The Government Relations and Communications Division was expanded to include consumer assistance and outreach work previously done in the agency’s four line operating divisions, and renamed the Government Relations and Consumer Affairs Division.
The Consumer Credit Division was reorganized into separate units for licensing and examination/enforcement. Managers were named for each unit resulting in a smaller span of control, increased communication and heightened morale. The division also assumed responsibility for licensing and supervising check cashers and money transmitters and issuers of money orders and travelers checks.
Total agency spending during the fiscal year amounted to $13,488,186. Reflecting a fiscally conservative management approach, the Department under spent its budget by $1,646,571 or about 12 percent during the fiscal year. Significant savings were achieved in the areas of personal services/fringe benefits ($1,164,738), other expenses ($390,925) and equipment spending ($148,782). Part of the savings realized in the latter area will be carried over to fiscal year 2004-2005 to assist in making planned information technology purchases.
During fiscal year, the Department successfully tested and implemented the state’s new automated financial management system: Core-CT. The new system uses current Web-based computer technology to process Departmental financial transactions.
The Consumer Credit Division’s licensing unit completed an analysis of the licensing processes for all license and registration types. As a result of the analysis, changes were implemented resulting in a more streamlined and efficient workflow. Theses changes, coupled with a minor staffing increase, allowed the unit to substantially improve license and registration turnaround times.
As a result of an increased enforcement focus by the Consumer Credit Division, Department actions taken against licensees and related entities during the fiscal year increased threefold from seven to twenty actions, in comparison with the previous fiscal year.
Reflecting a goal of minimizing the regulatory burden, the Financial Institutions Division now accepts an interagency application for starting a new bank. Organizers of a new bank can complete a single form that will be reviewed by both the Department and federal banking regulators. The Financial Institutions Division now also accepts a uniform interstate branch application to ease a bank’s interstate branching process with a single application that is accepted by the institution’s home and host states. The division is committed to streamlining its application process wherever possible to reduce the regulatory burden for the institutions it licenses and regulates.
The Financial Institutions Division continued to refine a risk-focused examination approach for state-chartered credit unions. The risk-focused approach allows the division to effectively monitor factors that may pose problems for institutions, such as asset quality, liquidity or asset-liability management.
The Legal Division recently changed its online legal research vendor. While the division was previously charged for the time a user was online, as well as for each user transaction, its new contract limits users, but provides them access to vast resources for an unlimited amount of time and transactions at a fixed price. As a result, the division saved $37,500 during the fiscal year and a total of $55,000 since changing companies. In addition, the division now accesses a legal publication online vs. in CD-ROM format, saving the agency more than $1,800.
The Personnel Office, in consultation with the Department of Administrative Services, improved the agency’s anti-harassment and affirmative action policies. The Personnel Office also began an extensive review to develop new performance measures to be used for employee ratings. A comprehensive 12-session training program for all Department managers was conducted to improve agency leadership.
Ralph Lambiase, Director of the Securities and Business Investments Division, assumed the post of President of the North American Securities Administrators Association ("NASAA"), becoming NASAA President for a one-year term beginning 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. In his position, Mr. Lambiase serves a national advocate for state securities regulation.
The division is assisted by the 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 27, 2003, the Department held its 15th annual Securities Forum in Stamford, Connecticut. Presentations by Department speakers, Securities Advisory Council members and others kept securities industry members abreast of critical regulatory and compliance developments.