Banking commissioner’s departure opens up replacement question

October 1, 2011

Banking & Finance, Politics

Mississippi Gov. Haley Barbour or his successor have the option of going into the financial services regulatory realm or into the banking sector itself to replace the retired John Allison as banking commissioner.

Allison says the load of regulatory changes facing the financial sector has led state banking supervision offices across the nation to fill their top ranks with seasoned regulators. The learning curve is too high and the pace of change too swift to do otherwise, said Allison, who stepped down Sept. 30 after 40 years with the state Department of Banking and Consumer Finance, including about 15 years as its head.

He said he believes Mississippi’s banking executives would mostly agree. “I think the industry is supportive of a professional like myself coming back.”

He added, “It’s kind of a going trend” to hire banking supervisors who have extensive experience doing regulatory work,.

In the past, states have filled their top jobs haphazardly, drawing from the banking world in some instances and from among regulators in others, according to Allison. That approach proved “less than satisfactory as far as effectiveness over the whole term of the thing,” he said.

Allison served as interim commissioner for a period in 1996 to 1997 and took the job permanently in 2000. He replaced Ronnie Parham, a career regulator who worked with the Federal Deposit Insurance Corp. before joining the Mississippi Department of Banking and Consumer Finance.

Allison’s unexpired term runs through June 2012, because by law it must overlap each gubernatorial administration by six months.

But either Barbour or the new governor can appoint a replacement at anytime.

Deputy Banking Commissioner Theresa Brady is serving as interim commissioner. The Columbus native worked in the department as an examiner a half dozen or so years just out of college. She left to go to law school at Mississippi College and joined the state Department of Treasury upon earning her degree.

From there she worked in the City of Jackson’s legal department until rejoining the banking department in 1998. She became deputy commissioner in 2000.

She indicated a desire to stay with the department as commissioner. “It would certainly be an honor to be considered for the position,” she said.

By state law, the commissioner must be a banker with either 10 years experience, including five years in a major policy making function, or a bank regulator with at least 15 years as an examiner.

Cliff Harrison, a banking lawyer with the Butler Snow law firm in Jackson, said he thinks the governor should solicit possible nominees from a variety of sources.

“I think that the regulator’s job has become more complicated,” he said, citing the sweeping Dodd-Frank banking reform law and new regulations in the consumer financial protection area.

Experience with new lending and the appraisal regulations will be important for anyone who fills the office, he said.

“I think you need someone in that position who is not just a regulator per se but who also can be balanced in their approach and be a representative for the industry itself,” Harrison said, explaining that too narrow a focus on regulatory enforcement could wind up regulating “some lenders out of existence.”

The term “balance” came up in responses from several Mississippi banking executives in assessing Allison’s tenure. They voiced hope that his replacement will have the same trait.

Allison achieved “ a remarkable balance,” said Hugh Potts Jr., CEO & chairman of Merchants and Farmers Bank in Kosciusko.

Potts said he thinks changes in the industry would make it easier “to get a good successor from the regulatory ranks than someone who is a banker who could transition into being a regulator.”

Aubrey Patterson, chairman & CEO of BancorpSouth in Tupelo, didn’t address where the governor should seek out Allison’s replacement but noted the effectiveness Allison brought to the post by establishing “a great balance of vision as it relates to the industry and regulatory effectiveness in governing the banks of our state.”

The president of the Mississippi Bankers Association, Mac Deaver, said he thinks it is critically important that the new commissioner understand what Mississippi banking is all about and what it is not about. While not committing either way on a successor, Deaver said the association believes “the success of our Mississippi banking industry demonstrates the correctness of Commissioner Allison’s approach as our state banking regulator.”

Ken Cyree, dean of the University of Mississippi School of Business Administration, said the appointment of Allison by successive governors “shows the wisdom of having a professional banking regulator at the helm.”

The successor, said Cyree, who is also Mississippi Bankers Association chair of banking and professor of finance, “should be strong enough to deal with Washington regulators and Mississippi legislators, while also balancing the demands of a vocal group of experienced bankers.”

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