Shop Talk: David Cotney, Division of Banking
Photo/Brandon Butler
David Cotney , Commissioner, state Division of Banks.
David Cotney started working at the state Division of Banks 20 years ago as an examiner and worked his way up to chief operating officer in 2005. After former commissioner Steven Antonakes left to accept a job at the new federal Consumer Financial Protection Bureau, Cotney was promoted to commissioner of the state agency that regulates state-chartered banks, credit unions and other non-depository finance agencies across the commonwealth. Here, Cotney discusses the mood of the state’s banking industry as well as the impact of new federal regulations on financial institutions.
>> What’s the general mood in the banking and finance industry right now?
Community banks are concerned. They’re operating in a tough economic situation and are managing through problems that are a result of the economy, but not necessarily actions they took. These community banks didn’t engage in poor underwriting or some of the sub-prime and risky behaviors, but because of all that, we ended up in a recession and now we’re all feeling the impacts.
Local bankers are also managing through some public backlash on the banking industry in general, which is really directed at the large banks that brought this country to the brink. The community banks didn’t engage in that behavior, but they’re getting this backlash that all banks are bad.
>> Is any of that public backlash justified?
I think there’s a lot of justification for the big banks that indeed engaged in some really risky behavior and paid their executives enormous sums of money to engage in this behavior. The community banks that are headquartered here have more traditional underwriting criteria, they know their customers, they lend locally and they didn’t get themselves into trouble. Today, they remain a source of strength. Still, in some cases, they’re getting an unfair backlash even though they continue to lend.
>> How do you respond to bankers who say government regulations are onerous?
There are some legitimate concerns on the part of community banks. When a new law comes down, it’s another responsibility they have to comply with, just like the bigger players. There is a proportionally larger burden on smaller institutions, and I recognize that.
There is, I think, a renewed recognition of that recently in Washington, D.C. There’s a lot of concern about what this Dodd-Frank Law and Consumer Financial Protection Bureau will mean, but one of the primary goals of that agency will be transparency and simplification. Complex forms and reporting requirements don’t necessarily benefit consumers and don’t necessarily benefit financial institutions, particularly the smaller ones. Hopefully the concerns community bankers have expressed will be listened to.
At the same time, I think that bankers understand that we have a job to do to supervise the industry. It’s just a fact that the compliance environment has been compounded by the economic environment. But we will get through this.
>> How do you, as the state banking regulator, balance need for oversight versus access to capital?
It is not a question of safety and soundness versus consumer protection. One feeds the other. You cannot have good and fair access to credit unless you have a strong financial institution. But you can’t have a strong financial institution unless they are treating consumers fairly and complying with all the laws and regulations.
>> What’s the key to fixing the ongoing foreclosure mess?
It is still a mess for those who have to go through a foreclosure. Collectively, we’re all dealing with these issues. There is no easy answer, no magic bullet. We’re not going to be able to pass a single law or write a single regulation to solve this.
The real answer is that we need to see employment levels increasing. Until then, we have a responsibility to make sure that the industry players are dealing with the consumers fairly. It’s a big concern when you see a servicer pursuing a modification with a consumer while at the same time pursuing a foreclosure. If there is a chance to avoid a foreclosure, that should be exhausted.
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