When I became Director in the summer of 2020, at the height of the COVID-19 health crisis, the uncertainty facing the banking sector was palpable. I heard the same trepidation from bankers, regulators, and consumers alike — the COVID economy was the most serious test facing banks since the financial crisis in 2008. Thankfully, the banking system proved resilient, and though the health crisis remains with us almost two years later, the hunkered down “doom and gloom” sentiment of 2020 seems a little more optimistic in early 2022.
Optimism for 2022 is particularly apparent in Arizona, where the state’s financial services sector is growing and thriving.
Optimism for 2022 is particularly apparent in Arizona, where the state’s financial services sector is growing and thriving. Just this past month, Arizona chartered its first de novo bank in more than a decade, with potentially more to follow in the coming months. These additions to Arizona’s banking community are timely. Although the state is in the top 10 for population growth according to the 2020 census and had a top-10 economy in the United States for GDP growth in 2021, Arizona ranks in the bottom 10 for the number of state-chartered banks actively serving the state. Needless to say, the opportunity abounds to provide banking services to our growing state.
Opportunity also exists to further strengthen the relationship between regulators and bankers. What our industry stakeholders knew for many years as “DFI” (Department of Financial Institutions) added another “I” in 2020 to become the Department of Insurance and Financial Institutions (“DIFI” — think “Wi-Fi” with a “d”). Merging two agencies with distinct identities (in the middle of a pandemic, no less) was challenging. We still have much to do to remain a responsive and efficient regulator. But those goals remain achievable if we prove capable of adapting to change effectively. We share many challenges facing our industry stakeholders: adjusting to altered expectations about performing work, hiring and retaining talent, and keeping up with the opportunities and risks associated with advancing technology. To those ends, in the last 12 months, DIFI has reduced its permanent office space by 45%, incorporated remote work as a regular part of most DIFI employees’ schedules, raised salaries, and sought to invest in our technological capabilities. All the change notwithstanding, we nevertheless take pride in hearing that the efficient and responsive agency you have come to expect remains.
As excited as I am about DIFI’s future, these adjustments to our agency hardly broach many of the larger regulatory topics affecting banking, and I do not expect 2022 to lack interesting developments in that regard. Cybersecurity continues to increase in importance for the safety and soundness of our banking system, and every commitment of time, effort, and money devoted to securing critical cyberinfrastructure is a resource well spent. The increasing development and use of digital assets also bear watching closely, much like fintech’s emergence several years ago. Though DIFI alone cannot provide all the answers needed to clarify issues like these, we are engaged on these topics and committed to providing certainty for our stakeholders as much as possible.
Regardless of what comes and goes on the cutting edge of regulation and innovation, the core business of banking and its benefits to our community remains. I am grateful for the chance to be part of this community and look forward to DIFI’s continued work with you all to ensure Arizona’s banking system remains secure.
Evan Daniels, Director, Arizona Department of Insurance & Financial Institutions
