Punishing executives for misconduct at banks is essential to deter wrongdoing on Wall Street, New York's banking regulator said.
"Just damning the entire firm is often times counterproductive," Benjamin Lawsky, superintendent of the New York Department of Financial Services, said today at the Bloomberg Markets Most Influential Summit in New York. "If you're not holding individuals accountable, you're not going to get the full effects of deterrence."
Lawsky, 44, has become increasingly influential in policing Wall Street and had a central role in BNP Paribas SA's record penalty for violating U.S. sanctions against Iran and Sudan. On top of paying the $9 billion fine, Lawsky insisted that BNP dismiss executives and suspended the bank's ability to do transactions in U.S. dollars.
Preet Bharara, U.S. Attorney for Manhattan, also speaking at the event today, said that while bringing cases against individuals is important, legal action against firms can mobilize shareholders to force change at the company.
"That's a kind of deterrence also," he said. "Ultimately, you want to prevent bad things from happening, not just hold accountable people who have engaged in bad conduct in the past."
'Armageddon-Like'
Lawsky said that cyberterrorism is the most significant issue that DFS will work on in the next year, saying the possibility of an "armageddon-like" cyberattack is one of his primary concerns as a financial regulator.
"I worry that we're going to have some sort of major cyber-event in the financial system that's going to cause us all to shudder," Lawsky said.
Lawsky said DFS is working on ways to give market participants an incentive to defend themselves from hackers, including encouraging insurance companies to raise the standards for firms to qualify for protection against cyberattacks.
