Interim Joint Committee on Banking and Insurance


Minutes of the<MeetNo1> 4th Meeting

of the 2016 Interim


<MeetMDY1> November 29, 2016


Call to Order and Roll Call

The<MeetNo2> 4th meeting of the Interim Joint Committee on Banking and Insurance was held on<Day> Tuesday,<MeetMDY2> November 29, 2016, at<MeetTime> 10:00 AM, in<Room> Room 149 of the Capitol Annex. Representative Jeff Greer, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Tom Buford, Co-Chair; Representative Jeff Greer, Co-Chair; Senators Julie Raque Adams, Chris Girdler, Christian McDaniel, Morgan McGarvey, Dennis Parrett, Dorsey Ridley, Albert Robinson, John Schickel, and Dan "Malano" Seum; Representatives Ron Crimm, Mike Denham, Chris Harris, Dennis Horlander, James Kay, Dennis Keene, Adam Koenig, Michael Meredith, David Osborne, Sannie Overly, Ruth Ann Palumbo, Steve Riggs, Bart Rowland, Jonathan Shell, Kevin Sinnette, Fitz Steele, Wilson Stone, Tommy Thompson, James Tipton, and Ken Upchurch.


Guests: Charles Vice, Commissioner, Kentucky Department of Financial Institutions.


LRC Staff: Sean Donaldson, Dale Hardy, and Dawn Johnson.


Approval of Minutes

A motion by Representative Steele and second by Representative Crimm to approve the minutes of the September 27, 2016, meeting carried by voice vote.



The committee presented resolutions to outgoing members Senator Girdler and Representatives Ron Crimm, Mike Denham, Fitz Steele, and Tommy Thompson for their years of service on the Banking and Insurance Committee. Co-Chair Buford presented a resolution on behalf of the committee to Co-Chair Greer for his tenure as house chairman of the committee. A motion by Senator Seum and second by Representative Rowland to approve the resolutions carried by voice vote.


Update on State of Kentucky Financial Industries

Charles Vice, Commissioner of the Kentucky Department of Financial Institutions presented an end-of-year report on issues relating to the financial industry.


Commissioner Vice gave an overview of the banking industry in Kentucky. Commissioner Vice expressed concern that on a national level there is a tremendous concentration of economic power in a relatively low number of banks. Seventy-five percent of industry assets in 2016 are controlled by banks with $10 billion or more in assets. There is a similar trend in Kentucky with significant consolidation within the industry from 2012 to 2015. Commissioner Vice said that Kentucky banks have outperformed state charter banks throughout the United States. The number of smaller banks in the state has decreased along with the number of banking employees.


Commissioner Vice explained that the purpose of the 2016 Community Bank Conference was to relate the importance of community banks to economic activity at the local, state, and national level. Topics included academic papers, banker interviews and surveys, and university case studies. A case study of Paducah Bank, submitted by Murray State University was chosen as a finalist. Issues of concern expressed by bankers included economic conditions, competition with large financial entities in areas such as ease of access to credit and compliance burden, and the regulatory environment.


Commissioner Vice discussed current cybersecurity issues including ATM skimmers, hacking attacks including ransomware, corporate account takeover, and third party service providers.


Regarding the Wells Fargo scandal, Commissioner Vice expressed concern that consumers received virtually no compensation from the $190 million fine paid by the company. He suggested incentive plans have more oversight to prevent similar incidents.


Responding to Representative Harris’ question, Commissioner Vice said removing some of the over burdensome regulations will benefit small banks. Regulations should be tailored to a bank’s business model with consideration of risks taken.


In response to Representative Riggs’ question, Commissioner Vice said his concerns about large financial institutions include the lack of oversight and the impersonalization towards providing smaller business loans to communities.


Responding to Senator Seum’s question, Commissioner Vice said he did not know why there was not more punishment given to those directly involved in cases like Wells Fargo. There may be a statute of limitations since some cases take a long time to investigate. He said it may difficult to find witnesses willing to testify in fraud cases.


Responding to Senator Parrett’s question, the commissioner said he thought there would be significant changes in the future by removing burdensome regulations from banks.


Representative Denham said cybercrime is one of the biggest threats the banking industry has faced. He noted that “friendly fraud” is an increasing problem with family members accessing bank accounts without permission.


Co-Chairman Buford said the Dodd-Frank Act regulations are cumbersome and need to be addressed.


There being no further business, the meeting was adjourned at 11:35 AM.