TDFI Balances Supervision Amid COVID-19

By Greg Gonzales, Commissioner, Tennessee Department of Financial Institutions

Governor Bill Lee held budget hearings with all state agencies in November. The discussions centered around the impact of COVID-19 on our operations and the citizens we serve.

In discussing our Department, I reiterated the unprecedented growth in the Tennessee banking and trust industries and that COVID-19 complicates our work.

Just five years ago, the combined state bank and trust industries totaled about $80 billion in assets. Today, the combined assets in the system total about $350 billion in assets—and growth continues.  

In framing where we find the Department today, in a normal environment this unprecedented growth in the banking system can challenge our capacity to appropriately assess and supervise these industries. But when we overlay a COVID-19 pandemic on top of it, our work becomes even more complex.

The fundamental balance we are trying to strike from an operations and budget standpoint is to determine what additional resources we need to meet our statutory mission, while at the same time taking advantage of the opportunities for efficiencies and producing budget savings because those opportunities are there.

We have begun to do both of these necessary things. Adding needed resources while simultaneously creating efficiencies and budget savings.

If we consider the thousands of institutions and entities under our jurisdiction including non-deposit companies, then our jurisdiction is approaching a half trillion dollars in assets and thousands of industry employees impacting essentially every Tennessee community.

We supervise this nearly half trillion-dollar financial institution industry with 160 Department positions and a $30 million budget.

And while we will need more resources over time, we think that much of that can be funded through the efficiencies we are achieving.

For example, before COVID-19 the Department operated 90% from home. It was relatively easy to move to essentially 100% when the Administration asked agencies to take all steps necessary to protect the health of employees and the public while maintaining core services. We were saving $400,000 annually from reducing office space throughout the state   before the pandemic hit, and we are looking to further downsize the remaining assigned space in the Tennessee Tower. Travel savings this year due to offsite examinations will amount to approximately $800,000.

Our initial response to COVID-19 was to pause our exams for a brief time to give institutions the opportunity to focus on supporting their communities and that is exactly what the industry did. 

Banks loaned out $9 billion dollars in Paycheck Protection Program funds and worked to support borrowers through loan modifications. 

Institutions altered their operations as well in order to continue providing banking services in the safest way possible for citizens. Bankers were economic first responders in meeting the needs of customers and communities.

An important dynamic is how we now regulate the two large banks under our jurisdiction that hold the majority of assets in the Tennessee banking system and how we balance that with our supervision of community banks.

On a regular basis we are engaged in large bank reviews that constitute a continuous examination. Those reviews cover a variety of topics throughout the year.

Depending on the large bank review topics, we are pulling from the same examiner pool to handle large bank reviews as well as community bank exams. This can present a challenge to our resources as we seek to enhance our regulatory capabilities for all banks from the largest to the smallest.

The Department continues to support rural communities through our regulation of community banks and other institutions. 

Based on ideas from Governor Lee, the Department has also established a Minority Depository Institution Partnership that affects Tennessee banks. The goal is to have an increased focus of our resources on these institutions to help them not just survive but thrive in supporting the customers and communities they serve. 

Because of the efficiencies we have been able to achieve along with growth in the banking system, we have been able to reduce our annual assessment on nearly every bank we supervise.

These budget efficiencies will also allow us to make needed Department salary adjustments to support our regulation of a growing banking system.

As I have stated for many years, our regulatory approach is tailored to facilitate economic progress and help you serve your customers and communities. Thank you for the partnership that we all have created over the years that supports this shared mission.

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