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Message from the Commissioner

May 19, 2008

To: California State Chartered Financial Institutions

From: William S. Haraf, Commissioner of Financial Institutions

Hello Everyone,

Last month, I was sworn-in as Commissioner of Financial Institutions by Dale Bonner, Secretary of Business, Transportation and Housing. I am grateful to the Governor for appointing me to this position. I write today to introduce myself to all of you and to talk about my expectations for the Department and our relationships with our licensees.

My career has spanned banking, academia, and now for the second time, government service. Throughout, my career choices have been shaped by my strong belief in the importance of a healthy well-functioning financial system to households, businesses and the overall economy. State-chartered financial institutions are a vital component of this system, especially in California. The tremendous diversity of our economy and our citizens is supported by the diversity and competitiveness of the financial institutions operating here.

I have spent my first few weeks on the job doing my homework -- getting to know the people in the Department, understanding our approach to supervision, and scouring data on the condition of our licensees, early warning indicators, and economic conditions across the state. More recently, I've begun to meet with some of you, and I plan to step up my outreach in the weeks and months to come. You will find me to be open, accessible and a good listener.

I have come to appreciate the dedication, loyalty, pride and competence of the people in the Department. I have high expectations for them, and I have high expectations for all of you. I particularly value open and honest communication between the Department and our licensees. Speaking for the Department, we prefer to hear bad news sooner rather than later. In turn, when bad news does arrive, you have my assurance that we will deal with it thoughtfully and judiciously.

The California economy is experiencing an economic slow down along with the rest of the country. No one really knows how long it will last, how serious it will become, or how deeply it will affect financial institutions operating in the state. Just last week, the Nobel Prize winner, Myron Scholes, was quoted as saying: "From my perspective, I think that we don't know if the storm has passed or if we are still in the eye of the storm. Are there other shoes to drop and new events or new shocks that will come to the fore?"

In times like these, it is especially important that we use good judgment in exercising our responsibilities. Those that are convinced the worst is over may be too complacent. All of us need to stay ahead of the curve addressing our current problems and preparing for the possibility of trouble ahead. We could be facing many challenges ahead, if we are not already.

• You will find that I will work hard to maintain a high level of commitment to our Department's values
• Promoting the variety of financial services available through the State chartering system;
• Regulating and supervising our licensees in an appropriate manner with integrity and professionalism;
• Delivering effective and timely service;
• Communicating in a respectful, timely and meaningful manner; and
• Maintaining a highly skilled, professional and diverse worforce.

At the end of the day, the foundation of all financial services businesses is trust and confidence. If these are ever diminished, they are difficult to restore. You must work hard to maintain the trust and confidence of your customers, and we at the Department have the responsibility to the citizens of California to ensure that this trust and confidence is well-deserved.

I look forward to meeting you in person. I plan to be a frequent contributor to the Department's Bulletin and to the Sparklist, and I welcome your honest feedback.

Sincerely,

William S. Haraf
Commissioner
Department of Financial Institutions
111 Pine Street, Suite 1100
San Francisco, CA 94111
415.263.8507