RIPEC produces performance index for R.I.’s banking regulator

The Rhode Island Public Expenditure Council on Monday released a report outlining a suggested performance management framework for evaluating the regulatory agency responsible for overseeing the state’s banking sector. More

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RIPEC produces performance index for R.I.’s banking regulator

THE RHODE ISLAND PUBLIC Expenditure Council, a nonpartisan public policy research organization, published a report Monday on a new index for the state's banking regulation agency.
Posted 5/19/14

PROVIDENCE – The Rhode Island Public Expenditure Council on Monday released a report outlining a suggested performance management framework for evaluating the regulatory agency responsible for overseeing the state’s banking sector.

The report was commissioned by the R.I. Department of Business Regulations’ Banking Division, which conducts regular examinations and reviews to determine whether state-chartered banks, credit unions and licensees are in compliance with Rhode Island’s state banking laws and maintain fiscal solvency.

To assess the Banking Division’s success in monitoring the overall health of the banking sector, RIPEC developed a Banking Regulation Index comprising seven components:

  • Average bank rating score assigned by DBR.

  • Average bank rating score assigned by external credit rating agencies.

  • Overall economic growth in the state compared with the previous 10 years.

  • Accreditation scores assigned to DBR by national bank regulatory entities.

  • Enforcement actions against banks and credit unions.

  • Consumer complaints brought against banks and credit unions.

  • Timeliness of DBR examinations.

The Banking Regulation Index is designed as a weighted average of its individual components, and the highest possible score is 100. RIPEC stated in its report, however, that until the index has been in effect long enough to build up a context of historical data, it will be difficult to determine a target index score.

The index builds on the Banking Division’s existing performance evaluation measures, which include “output” measures such as average days to issue a license or resolve a consumer complaint, but does not account for “efficiency” or “effectiveness” measures that are included in the Banking Regulation Index developed by RIPEC.

RIPEC’s review of similar banking regulation agencies in states throughout the Northeast found that while many are transparent in reporting performance in terms of output or outcomes, very few states report on performance indicators such as efficiency, and none report on agency effectiveness.

The DBR will launch a pilot of the Banking Regulation Index to seek industry input before broadly implementing the index in 2015. During the pilot phase, the index will be calculated on a quarterly basis. If successful, the index may be replicated as a template for DBR’s Insurance and Securities divisions, RIPEC said.

To view the complete RIPEC report and the suggested rubric for calculating the Banking Regulation Index, visit www.ripec.org.

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