Arkansas State Bank Department

The Arkansas State Bank Department (ASBD) is an executive branch state agency that was created by Act 113 of 1913, and it is responsible for the regulation and supervision of Arkansas’s state-chartered banks as well as bank holding companies of its state-chartered banks, state-chartered trust companies, industrial loan institutions, regional and county industrial development corporations, and regulated economic development enterprises.

For at least a decade prior to the passage of Act 113, Arkansas bankers had been advocating for the creation of a state bank department. Aside from national banks that were regulated by the Office of the Comptroller of the Currency, banking was unregulated in Arkansas in the early twentieth century. This lack of oversight encouraged fraud and left many banking operations under-capitalized and poorly managed, which often resulted in their failure. Bank failures could be contagious. When a bank failed, it could cause depositors of other banks to panic and, in turn, start a bank run. There were no protections for depositors of failed banks. Many depositors would lose all their money when a bank failed. It was believed that a state bank department would protect depositors by improving the safety and soundness of the banking industry, reduce the likelihood of bank failures, and help promote a stronger economy.

ASBD is administered by the Bank Commissioner, who is appointed to a four-year term by the governor with the consent of the Arkansas Senate. The Bank Commissioner is also a member of the State Board of Finance, Arkansas Financial Education Commission, and Arkansas Teacher Retirement System’s board. ASBD is solely funded by special revenues from fees and assessments made on its regulated institutions and does not receive general revenue funding from the state.

For most of its history, ASBD was an independent, cabinet-level agency, but after the passage of Act 910 of 2019, ASBD became a division of the Arkansas Department of Commerce. By law, the Bank Commissioner is required to make an annual report to the Secretary of Commerce (prior to 2019, to the governor), detailing the work and business of the department and providing financial and organizational information on each state-chartered bank under the department’s supervision. ASBD is an accredited member of the Conference of State Bank Supervisors (CSBS), a national organization of state banking and financial regulators.

To ensure the safety and soundness of its regulated entities, ASBD conducts regular examinations. For banks and bank holding companies, these examinations evaluate the institutions’ capital, earnings, management, liquidity and funds management, sensitivity to market risk, and general compliance with state and federal laws, regulations, and rules. Failure to operate a bank in a safe and sound manner may result in the issuance of enforcement actions, or in extreme cases, result in the Bank Commissioner closing the bank and naming the Federal Deposit Insurance Corporation (FDIC) as receiver of the failed institution.

The State Banking Board was created by the legislature in 1933 to review and recommend changes to the banking laws of the state and to approve or disapprove certain applications submitted to ASBD. The State Banking Board has six members who are appointed by the governor and confirmed by the state Senate.

The applications the State Banking Board has approval authority over include issuance of new bank charters, mergers or consolidations involving state-chartered banks, purchase and assumption agreements for more than fifty percent of the assets or liabilities of a depository institution, amendments to articles of incorporation, relocation of a state-chartered bank’s main office to another city, and rules promulgated by the Bank Commissioner. Applications not required to go before State Banking Board are reviewed and approved or disapproved by the Bank Commissioner.

While the State Banking Board is a separate entity from ASBD with no oversight of the day-to-day operations of the department, ASBD provides meeting space and staff support to the State Banking Board.

In 2023, Governor Sarah Huckabee Sanders signed SB418 into law as Act 475, which transferred the administrative functions of the Arkansas Securities Department to the Arkansas State Bank Department and amended the law concerning the organization of the Arkansas Securities Department.

For additional information:
Arkansas State Bank Department. https://banking.arkansas.gov/ (accessed March 31, 2023).

John Ahlen
Little Rock, Arkansas