Financial Institutions Division
In addition to safety and soundness examinations, the Financial Institutions Division conducts separate trust examinations at state-chartered limited purpose trust companies and at trust departments that have been formed within certain state-chartered Connecticut banks. (See our trust companies in Connecticut page for information on limited purpose trust companies and banks that have been granted expressed authority by the banking commissioner to provide fiduciary services to their customers). Each trust department is examined annually by either the division or the FDIC, while each limited purpose trust company is examined yearly by the division. At these banks, trust account funds are managed separately and accounted for separately from other assets managed by the bank. The focus of the trust industry continues to change from individual trust accounts to the management and administration of collective trust funds, including IRAs, Keogh plans and 401K Retirement Plans.
The rapid growth of information systems technologies has caused significant changes in the way banks process data and information. A review of information systems controls is necessary to ensure the accuracy and reliability of an institution's records. The division is challenged to keep abreast of emerging and changing information systems technologies in order to understand their risks.
Community Reinvestment Act (CRA)
The division is responsible for Community Reinvestment Act (CRA) compliance. Banks and savings institutions are granted charters to help meet the convenience and needs of the communities in the areas where they are located. The federal Community Reinvestment Act was enacted in 1977 against a backdrop of concern over unfair treatment of prospective borrowers by financial institutions and over unwarranted geographic differences in their lending patterns. In the CRA, Congress reaffirmed that every financial institution has a continuing and affirmative obligation to help meet the credit needs of its entire community, including low-and moderate-income neighborhoods.
In 1989, Connecticut lawmakers enacted PA 89-295, a state version of the federal law. Since July 1, 1990, the banking commissioner has been required to assess the community reinvestment performances of state-chartered financial institutions and to consider their community performance as a basis for approving or denying certain applications pertaining to bank expansion. An amendment to the law passed in 1992 (PA 92-56) requires that the banking commissioner prepare and submit annually to the state treasurer a list of state-chartered banks which receive a rating of "needs to improve" or of "substantial non-compliance" with CRA principles. Under the present state CRA law, Section 36a-33 of the Connecticut General Statutes, a less than satisfactory rating prohibits an institution from accepting state government or municipal deposits. At present, of the Connecticut state-chartered banks subject to CRA, all had been given public ratings of "satisfactory" or better. Link to CRA ratings.
In a move to improve upon the reporting elements associated with community reinvestment, the FDIC and other federal financial supervisory agencies jointly adopted significant changes to their respective community reinvestment regulations which became fully effective on July 1, 1997. The banking department introduced legislation to the 1996 Connecticut General Assembly that amended the state's community reinvestment statutes to impose substantially the same regulatory requirements as provided in the federal CRA and the newly-adopted regulations. Public Act 96-8 preserved the unique aspects of the state CRA while avoiding excessive compliance burdens for Connecticut banks by insuring they will not be forced to comply with two different sets of CRA requirements. Public Act 97-33, also introduced by the Banking Department, limits the requirement of filing a community reinvestment plan in certain instances.
Revised Community Reinvestment Act (CRA) regulations also include provisions allowing an institution with unique or narrow business strategies to be designated as a wholesale or limited purpose institution subject to specially tailored CRA performance criteria. Any institution also can elect to be evaluated on the basis of a CRA "strategic plan" developed by the institution with input from the community. To exercise these options, however, an institution must obtain approval from its appropriate federal and state regulator. Two types of institutions can qualify:
- "Wholesale banks," which are financial institutions that are not in the business of extending home mortgage, small business, small farm, or consumer loans to retail customers.
- "Limited purpose banks," which are financial institutions that offer only a narrow product line, such as credit cards, to a regional or broader market.