Banking in the Ninth

Embracing Change

Ninth District Highlights - September 2017

Christine Gaffney | Senior Vice President

Published September 19, 2017  | September 2017 issue

Christine Gaffney

Effective June 1, I began a new position at the Minneapolis Federal Reserve Bank as the head of Supervision and Regulation. Many of you built a relationship with Ron Feldman during his tenure in this position, and I look forward to doing the same. I had the opportunity to work directly for, and learn from, Ron for nearly 10 years. I intend to use the knowledge and experiences I gained, and I also intend to take the time to listen to key stakeholders, internally and externally, to determine how and where we can collectively benefit from change.

For my inaugural Banking in the Ninth article, I will reflect on change. Change is inevitable, yet it can be challenging because people tend to fear the unknown. As we embark upon this change of leadership in the Supervision and Regulation function, we have a great opportunity to think about what change means, why it is important in the work we do and why we need to be open to embracing the unfamiliar.

Comfort in familiarity

Human nature lends itself to taking comfort in what’s familiar. The challenge with this is that our current financial and regulatory environment is filled with unknowns—whether it is regulatory reform, the current political administration or the next greatest risk to the financial system. It is paramount that as financial institution supervisors, we do not rest on the comfort of the variables we know. Rather, we need to be attuned to the changing environment in which we operate and adjust accordingly. To do this, as supervisors, we want to ensure that we are listening to the concerns of the industry. It also means we need to be comfortable with the unfamiliar when we find it is necessary to adjust course. In our organization, we refer to this as “leading in ambiguity.” We often emphasize the importance of this with our leaders.

The evolving supervisory process

Those of you who have been in the financial industry for some time are well aware of the changes we’ve implemented over the years in our supervisory processes. Indeed, this issue of the newsletter provides an update on some of our changes related to conducting more examination work off-site. Some of the changes are due to advances in technology, but many of them also reflect the post-financial-crisis environment. Post-crisis, we began seeing fewer issues that required the immediate and direct attention of examiners. This is one example of how we have embraced change and how we adjusted course based on industry conditions, feedback and the environment. While we started implementing such changes over three years ago, our work on off-site examinations continues to evolve. This change has been easier for some to embrace than others, both for our own examiners and for our state member banks. Again, we have comfort in familiarity, and this change pushes us outside our comfort zone. Given the unknowns with the regulatory environment, we can and should expect ongoing evolution in the way we carry out our supervisory work.

Seeking input on change

In order to get more comfortable with and embrace change, particularly the unknowns, we must have strong avenues for two-way communication. We will continue to conduct Outreach events and will communicate with you through avenues such as this newsletter; however, we also need you to provide feedback and ideas to ensure that we have a strong understanding of the environments in which you operate. I encourage you to reach out to me directly, reach out to your relationship manager or submit comments and suggestions for improvements to our central email address: mpls.src.outreach@mpls.frb.org. If there’s one thing we can count on, it is change. Please let us know how the changing environment and the unknowns affect you so that we can be in the best position to respond.

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