The Business Council is carefully evaluating the Executive Budget proposal to merge the Banking and Insurance Departments, along with the Consumer Protection Board, into a new Department of Financial Regulation.
The financial services sector is one of New York’s most significant contributors to our private sector employment base and to overall state revenues. This proposal raises many questions regarding the future regulation of this sector and is being advanced simultaneously with the development and implementation of federal financial services reforms enacted by Congress.
Caution is urged to ensure sufficient understanding on the implications of a proposed merger are documented and evaluated before final action is taken. Now is not the time to undermine job retention or creation in New York State, and overly burdensome regulatory practices are among the most frequently cited reasons upon which business location and retention decisions are made.
The Business Council urges the Governor and Legislature to allow a thorough review and comment of this proposal. Importantly, while the Business Council supports the Governor’s efforts to reorganize and reduce the size of state government as part of his budget balancing plan, this consolidation proposal does not significantly impact the state’s deficit reduction efforts, as both Insurance and Banking departments are fully funded by industry fees.
In particular, the Council is evaluating the budget’s proposal for expanded regulatory and enforcement authority for the new Department of Financial Regulation, and the appropriateness of proposals that would increase the legal exposure of the business community and taxpayers. For example, the proposal would grant this new Department with broad subpoena powers; authority to seek injunctions; administer oaths; examine and cross examine witnesses; and receive documentary evidence. The need for this additional authority, in context of other state oversight authority, is an issue of particular concern for us.
Furthermore, this proposal significantly increases penalties for violations. The penalties would be in conjunction with damages, restitution, civil and criminal liability. The Business Council is also concerned about the authority of Department staff to levy penalties for violations.
The Business Council supports Governor Cuomo’s blueprint for fundamental changes in how New York State budgets and advancing innovative approaches to managing State government. However, due to the complexity of the proposed agency merger, the industry fee-based financing of these agencies, the significant changes in regulatory and enforcement authority, and increased penalties proposed in the Executive Budget, we strongly recommend that the Governor and Legislature take all necessary time in re-crafting its regulatory programs for the state’s financial services industry.