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Kentucky makes wholesale amendments to its financial services code
On April 9, the Governor of Kentucky signed into law HB 726 (the "Act"), an act that will make substantial amendments to the state’s regulation of financial services under Chapter 286 of the Kentucky Financial Services Code. Of note, the Act will update key definitions under the state’s financial services code, including “Bank,” “Company,” “Control,” and “Deposit.” Some of the changes will amend certain powers to the financial commissioner, an appointed position by the Governor, as well as the banking experience requirements for this position. The Act also, among other things, addresses in- and out-of-state trust company rules; banking activities rules for foreign and out-of-state financial companies; bank mergers and reviews by the commissioner; bank closures; bank loan compliance under 12 U.S.C. sec. 371c (prohibiting acceptance of a security from a bank’s affiliate); the commissioner’s rules to remove any officer, director, or employee of a bank via written notice; and mortgage loan license fees, including annual assessments.
House Financial Services Committee questions financial agency representatives on technological implementations
On December 5, the U.S. House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion held a hearing on “Fostering Financial Innovation: How Agencies Can Leverage Technology to Shape the Future of Financial Services.” The Committee invited representatives to testify from the SEC, OCC, FDIC, CFPB, NCUA, and the Federal Reserve. The representatives fielded an array of questions focused on artificial intelligence, cryptocurrencies, and central bank digital currencies (CBDCs), and broadly focused on the need to balance technological innovation within the financial sector with managing risk.
On cryptocurrencies, congressional representatives posed questions on the nature of criminal activity among other risks. The discussion addressed bank risks related to crypto assets—while banks do not hold crypto assets, the representative from the Federal Reserve noted how banks may face liquidity risks when holding deposits from crypto-related companies. On CBDCs, the Committee asked for an update on the U.S. CBDC; the Federal Reserve representative mentioned the Fed’s current research on CBDC technologies but noted that the agency is still “a long way off from thinking about the implementation of anything related to a CBDC.”
On the topic of artificial intelligence, agency representatives discussed how banks are using the technology for fraud monitoring and customer service. The discussion addressed how artificial intelligence technology can create deepfakes using generative models to mimic an individual’s appearance or voice, and thus help scammers bypass traditional security checks. In response, some countries have implemented a secure digital ID that biometrically syncs to one’s smartphone, and the NCUA noted that it is currently evaluating this technology.
Georgia executive order requires telework, virtual conduct of business
On December 8, the governor of Georgia issued an executive order requiring businesses considered to be “Critical Infrastructure” to implement measures to mitigate the spread of Covid-19, including telework for all possible workers and delivering intangible services remotely. The order authorizes the Georgia Department of Economic Development to issue further guidance to persons considered to be Critical Infrastructure, which includes the financial services sector.