State banking policy began with an act in 1782 prohibiting the operation of any bank within the State except for the Federal Bank of North America. In 1791, the legislature authorized a charter for the first State bank, the Bank of New York, and thereafter chartered other banks by special acts. A law in 1829 (Chapter 94) set up the Bank Fund, later renamed the Safety Fund, to guarantee the payment of debts of insolvent banks. All State-chartered banks were required to make an annual contribution to the fund, which was managed by the State treasurer. The same law provided for the appointment of three bank commissioners to examine the financial status of banks and to report annually to the legislature.
State regulation of banks was altered by the Banking Law of 1838 (Chapter 260), which required banks to file certificates of incorporation with the secretary of state and report annually to the comptroller. In 1843, the Safety Fund and the bank commissioners appointments were abolished, and bank examination responsibilities were transferred to the comptroller. Bank regulatory functions of the comptroller and secretary of state were subsequently transferred to the Banking Department headed by a superintendent of banking, established in 1851 (Chapter 164). the Banking Department, the oldest bank regulatory agency in the U.S., supervised the conduct of licensed and state-chartered banks and trust companies, savings banks, credit unions, mortgage brokers and bankers, domestic and foreign investment companies, small loan companies, licensed lenders, budget planners and other financial bodies. No major alteration of banking policy occurred for the next seventy-five years, and the Banking Department was continued (Laws of 1926, Chapter 352) after the 1925 constitutional reorganization of State government.
In 1932 (Chapter 118) the Banking Board was created to advise and cooperate with the Banking Department in the formulation of banking standards and to exercise power to approve or disapprove the issuance of bank charters and licenses and the establishment of branch banks. The board acted as an advisory committee to the superintendent, ex-officio chairman of the board, regarding the regulation of banks.
Until 1849, insurance companies doing business in New York were chartered by special acts of the Legislature. A law passed that year (Chapter 308) required prospective insurance companies to file incorporation papers with the secretary of state. The law also vested regulatory power over insurance companies with the comptroller, who was authorized to require the companies to submit annual financial statements and to deny a company the right to operate if capital securities and investments did not remain secure.
The Insurance Department was created in 1859 (Chapter 366) and assumed the functions of the comptroller and secretary of state relating to insurance. The department was headed by a superintendent appointed by the governor. The department monitored the activity of insurance companies and other financial intermediaries in New York State in an effort to ensure proper conduct, protect policy holders, eliminate fraud, and nurture the growth of the state's insurance industry. The agency was continued unchanged after the 1925 constitutional reorganization of State government (Laws of 1926, Chapter 353).
The Insurance Frauds Prevention Act of 1981 (Chapter 720) granted the Department authority to investigate cases of suspected insurance fraud, force the cessation of fraudulent activities, and cooperate with law enforcement agencies in the prosecution and conviction of persons who are parties to insurance fraud. The act also provided for the creation of an insurance frauds bureau within the Department to administer and enforce the act's provisions.
In 1998, the Holocaust Victims Insurance Act was passed (Chapter 259) to assist persons seeking to recover proceeds from insurance policies issued to or covering the life or property of Holocaust victims. The legislation directed all insurers organized, registered, licensed, or accredited to conduct business in the State to diligently and expeditiously investigate claims relating to policies originally issued to or held by Holocaust victims, and to accept, if necessary, alternative forms of documentation from claimants. The act also directed insurers to make appropriate payments to claimants irrespective of any statute of limitations or notice requirements imposed by any law or stipulated in the terms of the original policy.
Part A of Chapter 62 of the Laws of 2011 merged the Banking Department with the Insurance Department to form one financial regulator, the Department of Financial Services. All functions and authority of the Banking Department and Insurance Department was transferred to the Department of Financial Services, to be headed by the superintendent of financial services. The superintendent assumed the functions formerly exercised by the Banking Board and the board was dissolved. Governor Andrew Cuomo's goal in combining these two agencies was to modernize regulation of a wider array of financial products and services by allowing a single agency to manage operations. The original proposal also called for the Consumer Protection Board to be merged along with the Banking and Insurance Departments; however the Legislature rejected this provision and instead incorporated the board into the Department of State.
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The Department of Financial Services is responsible for reforming financial regulation and supervising financial entities in New York State. It aims to regulate financial markets, protect against financial crises, and safeguard markets and consumers from fraud by making an effort to ensure judicious conduct of financial service providers, bolster fair business practices and educate users of financial services and products. The superintendent of financial services, an appointed official selected by the governor, serves as department head. The department is made up of five divisions: Banking, Insurance, Financial Frauds & Consumer Protection, Real Estate Finance, and Capital Markets.
The Banking Division is responsible for overseeing the activities of banks and other financial institutions through actions such as chartering, licensing, registering and examining safety and soundness; the division contains four units: Foreign & Wholesale Banks, Community & Regional Banks, Mortgage Banking and Licensed Financial Services. The Insurance Division oversees insurance companies that conduct business in New York State; it includes the Health, Life and Property Bureaus. The Financial Frauds & Consumer Protection Division fights against financial fraud and educates and protects consumers; it looks into activities that may be in violation of the Financial Services Law or other laws, and brings proceedings against those found to be in violation. This division consists of five units: Criminal Investigations, Civil Investigations, Consumer Assistance, Consumer Examinations, and Consumer Education & Outreach.
The Capital Markets Division monitors the newest products and developments in the financial services marketplace in an effort to better regulate financial services and products. The Capital Markets Division also oversees state and municipal retirement systems and other types of pension plans. The Examination Bureau and Research and Analysis Bureau lie within the division. The Real Estate Finance Division supervises and examines financial service industries pertaining to mortgage and title insurance; it also investigates homeowner and real estate issues. In addition to these five divisions are three other initiatives taken on by the Department of Financial Services.
The Holocaust Claims Processing Office (HCPO), mandated by the New York Holocaust Victims Insurance Act of 1998 and Executive Order 50, provides free assistance to Holocaust survivors and/or their heirs in efforts to recoup lost assets. HCPO is the only government body in the world that provides such assistance at no cost. The Bank Development District (BDD) Program, formed in 1997 by the Banking Law, seeks to nurture the growth of local economies by encouraging the establishment of bank branches in areas proven to be in need of banking services. The New York Liquidation Bureau is a separate office that lies under the authority of the Superintendent of Financial Services and is primarily responsible for the rehabilitation or liquidation of insolvent insurance companies.
The nine-member State Charter Advisory Board helps promote the state banking system and assists the superintendent in maintaining state chartered banking institutions and encouraging federal ones to switch to a state charter. It is made up of one representative of consumers, one representative of foreign banks, one representative of credit unions and the remaining representatives from a wide array of banks of different sizes from various geographic locations. The representative of consumers is chosen by the superintendent and the rest of the board consists of representatives nominated by state chartered institutions.
L. 2011. Ch. 62.
