Lawsky Touts Creation of New York Financial Office

New York Banking Superintendent Benjamin Lawsky formally announced the launch of the state's new Department of Financial Services on Monday, a merger of its banking and insurance offices.

Lawsky, who was confirmed to head the new agency in May, touted the agency's priorities, including modernizing regulations while also creating jobs and protecting consumers.

"Some say regulators need to tread very careful now and not to take action — rather, regulators should be helping to get the economy going," Lawsky said in a speech at Pace University. "But at the same time there is a powerful sentiment that no one has been held accountable for the financial crisis. Regulators are too cozy with those they regulate and at the end of the day, the rich and powerful will not only be getting richer and more powerful, but they also will get bailed out while main street, while regular people, get crushed."

DFS has 1,700 employees supervising 3,900 institutions with $5.7 trillion in assets under management. The department's work will be divided into five main divisions — insurance, banking, financial frauds and consumer protection, real estate finance and capital markets.

The department was formed to address gaps between previous regulatory bodies, which allowed products such as credit default swaps to go unchecked. A provision in the DFS statute states that any new financial product or service not currently regulated by another agency will automatically be overseen by DFS.

Lawsky said the agency will add a new director of enforcement, an executive position focusing on criminal investigations in the financial services industry, calling it a "new, powerful cop on the beat."

But Lawsky warned that the agency will have to strike a careful balance between enforcement and encouraging economic growth. He pointed to his work with Gov. Andrew Cuomo when he was attorney general in rooting out corruption in the student loan industry. This led to the development of a code of conduct to help build consumer trust. Lawsky wants to use this same principle with other financial services products.

"If you find the right balance, you can create a race to the top where it is actually good for the industry, in their interest and helps their bottom line to protect consumers better," he said.

The new department has also been tasked with a jobs creation initiative. Lawsky hopes to develop the capacity for his agency to approach businesses and demonstrate how doing business in the state of New York will be advantageous to them.

"I want to have that capacity down the road where we can walk into a CEO's office and say you could be doing much better for your company by expanding in New York or rearranging your business in this way," he said. "This is very hard to do. It's not something a regulator normally tries to do."

Finally, the agency is also looking for ways to cut costs. Lawsky stated that DFS is on track to cut its budget by at least 10%, saving more than $25 million. These savings initially will be passed onto the businesses that help fund the department, hopefully acting as another way to encourage job growth, Lawsky said.

For reprint and licensing requests for this article, click here.
Law and regulation Consumer banking
MORE FROM AMERICAN BANKER