Melanie Hall lived through Hurricane Katrina in New Orleans, and the experience surged to the top of her mind this year. The commissioner of Montana’s Division of Banking recently compared the pandemic’s economic impact to the storm and its destruction. “We think of hurricanes as something that happen to someone else,” she said while speaking at the Bank Holding Company Association’s Fall Digital Symposium in October. Despite support and money from both the state and Federal government, “[the impact] will come home to all people eventually,” Hall said. “We need to be ever vigilant that it could come to our banks.”
Montana’s economy has weathered the pandemic pretty well so far, buoyed by a fairly robust summer for industries like tourism and hospitality, Hall said. The ag sector has also done well. The state set up a program to put a pause on loan repayments for struggling customers and used CARES Act funds to make the interest-only payments to the bank for the customer.
Hall, who has led Montana’s Division of Banking since 2011, is also chair-elect of the Conference of State Bank Supervisors. At a strategic planning meeting last year, CSBS chose some general priorities for 2020: Preservation of the dual banking system; the workforce of tomorrow; partnerships with federal agencies and other industry associations, and streamlining state licensing processes. As with so many things, the pandemic forced a pivot with CSBS, narrowing its focus to what it deemed most important. “Making sure that the licensing and supervision process for multi-state companies is as efficient and uniform as it can be while also still allowing for state autonomy,” Hall said.
The Montana regulator sees the value of the dual banking system in the face of vast differences across state lines. “I think it is important for states to be able to determine on an individual basis what consumer protections their citizens have access to and [then ensure] those companies stay in line with those different consumer protections,” she said.
Hall cited fintech regulation as a key area for this. “It can be very difficult to help your citizens when that [fintech] company is not something that is regulated by you,” she said. There’s tension between effective consumer protection regulation at the state level and technology’s tendency to move fast and break things while innovating. That friction, though, can push more traditional providers to step up their game, Hall posited.
The overlap between state and federal regulators can provide a needed check, however: “Some of that tension is healthy tension that challenges all of us to do better.”
Despite disagreements — over fintech regulation, true lenders or special charters — state and federal regulators both want a healthy financial system, and cooperation helps achieve that. “It brings more thoughts to the table when you have that co-regulator work relationship,” Hall said. “The FDIC or the Fed might bring their perspective that involves a number of states and a region; the state can really focus on local communities.”
After getting her law degree from Tulane, Hall launched her legal career with a focus on maritime personal injury and pharmaceutical litigation. Her greatest experience with financial services was minor involvement representing title companies in the wake of the Countrywide fiasco before she joined the Division of Banking.
She credited a trio of division veterans who took the “newbie … with very little experience and background” under their collective wing and eased what Hall called a steep learning curve.
“Quite honestly, it was a crazy and interesting time to jump into the world of financial institutions,” Hall said. About two-thirds of Montana’s banks were under some sort of enforcement action when Hall started the job. In a newly post-Dodd-Frank world, Montana was in a state of churn around short-term and consumer lending, Hall said.
While she did not have to close any banks in the state, Hall did have a near miss in 2012 with a small bank with a “serious defalcation that essentially wiped capital to zero overnight.” She opted to work with the bank and its shareholders, who put in more money, and the bank remained open. “If you are paying attention, there comes a natural inflection point,” Hall said. “I probably lean on the side of allowing them to fight until their dying breath, because I know how hard it will be if they close on the community that they’re in, particularly in a rural state like Montana.”
Another major change she oversaw was the division’s modernization and shift from paper-based systems. Hall also zeroed in on examiner retention. “Over my first few years, I realized that state agencies are always going to struggle to compete with federal agencies from a salary perspective for examiners,” she said, “but what we can offer to them is a better life, more autonomy and less time on the road.” The shift to digital technology helped her — including a test run of a completely off-site exam — cutting down time spent on administrative tasks as well as setting up the division well for the pandemic-forced shift to remote working earlier this year.
Bankers weren’t initially enthusiastic about all of the changes, including those that kept examiners out of banks.“They wanted the ability to put their finger in the nose of an examiner, explain why [the examiners] were wrong,” Hall said, but with patience, transparency and communication, both sides of the partnership have adjusted.
“She’s a highly skilled professional and highly regarded within the banking industry,” said Cary Hegreberg, president and CEO of the Montana Bankers Association. “Community banks feel she will go to bat for them when warranted.”
Although Republican challenger Greg Gianforte will replace Democratic Gov. Steve Bullock in January, bankers would prefer the commissioner continue in her role. “We are hoping that our new governor will see fit to retain her, and we’ve already made that request known to the new administration,” Hegreberg said.