Blog Series: Administration of the Division of Banking Changed by New Law
Posted on 08/12/2022 at 01:28 PM by Sierra McConnell
On July 1, the most significant change to the legal landscape for Iowa banks in a generation occurred when new amendments to Iowa Code Chapter 524 became effective. For the next several weeks, Dickinson Law will cover some of the most significant changes and how they affect Iowa banks.
The Iowa Division of Banking (“IDOB” ) has been supervising and regulating state-chartered commercial banks, professional services, and all other entities subject to the regulatory purview of the IDOB since 1917. The Iowa Banking Act (the “Act”), Iowa Code Chapter 524, underwent its first comprehensive revision since 1995 during the 2022 Iowa legislative session and the provisions governing the administration of the IDOB were amended to reflect the future operations of the IDOB.
ADMINISTRATION OF THE IDOB
The Act now includes a process for designating an alternate decision maker for regulated entities that the Superintendent owns, manages, or otherwise has an interest in. Unlike other states, Iowa requires the Superintendent of Banking to have a minimum of five years executive experience in banking and the Superintendent is able to retain their interest in a bank or regulated entity. This allows the Iowa Superintendent to bring past experience and insights into their role, but also creates the potential conflict of interest when examining the applicable bank or regulated entity. While the IDOB has been informally following these conflict of interest rules, the legislation now specifically requires the Superintendent to recuse themselves and then the state banking council designates an alternate who meets the experience requirements for the role of Superintendent to serve as decision maker for any regulatory actions affecting the bank the Superintendent has an interest in.
The Act also updates the chain of succession that designates the IDOB staff who will serve as acting Superintendent if the appointed Superintendent is unavailable, incapable of fulfilling the duties of the office, or if the position becomes vacant. First in line is the chief of the bank bureau, then the chief examiner of the bank bureau (a relatively new position within the IDOB), and the last designated alternate is the chief of the IDOB’s finance bureau (who oversees regulation of non-depository entities).
The IDOB’s use of its funds was also reviewed and amended. From time to time, the IDOB receives funds from multistate settlements with financial services providers like mortgage lenders. The Division was previously only authorized to use these funds for the purpose of supporting the duties of the IDOB related to financial regulation and this purpose was limited to nonrecurring expenses like equipment purchases. Now, the funds can be used to promote financial-related education including supporting financial literacy and similar financial education initiatives.
Another amendment relates to the Superintendent’s authority to conduct examinations by clarifying that the IDOB may contract with other state financial regulators to assist, or receive assistance, with respect to both examinations and other supervisory activities like licensing. This provision also adds in the ability to reimburse the applicable agency that is furnishing assistance to the IDOB.
Overall, these revisions are intended to modernize the administration of the IDOB and provide clarity for its operations in the years to come.
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Categories: Sierra McConnell , Dickinson Law News, Banking Law
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