May 9, 2023
SUPERINTENDENT ADRIENNE A. HARRIS RELEASES UPDATED GUIDANCE ON VETTING KEY PERSONNEL FOR ENTITIES LICENSED OR CHARTERED UNDER NEW YORK BANKING LAW
GUIDANCE ARTICULATES DEPARTMENT’S EXPECTATIONS FOR COVERED INSTITUTIONS’ ASSESSMENT OF CHARACTER AND FITNESS
Today New York Department of Financial Services (“DFS”) Superintendent Adrienne A. Harris released Proposed Guidance to New York State banking organizations and non-depository financial institutions licensed or chartered under the New York Banking Law (“Covered Institutions”) to notify them of the Department’s updated expectations regarding their review and assessment of the character and fitness of their directors and senior officers, both upon onboarding and on an ongoing basis.
“As part of my broader review of the Department’s regulations, guidance, and processes, I identified character and fitness standards as a policy priority,” said Superintendent Harris. “In light of recent events, this updated guidance takes on even greater relevance, as we work to ensure New Yorkers can have confidence in the management of our state’s financial institutions.”
The Proposed Regulatory Guidance on Character and Fitness Assessments Addresses the Following:
Covered Institutions are expected to update and modernize their policies and procedures to require vetting of Designated Persons—including senior officers and members of any governing board—both at onboarding and on a regular ongoing basis, to ensure a robust initial vetting and to confirm that no new circumstances or conflicts of interest have arisen that could compromise the organization.
Aligned with the Department’s expectations, Covered Institutions should take a risk-based and proportionate approach, tailoring their vetting frameworks to their specific business needs, operations, and risks.
Covered Institutions should inform the Department promptly if, through character and fitness reviews, they determine that a previously vetted Designated Person is no longer fit to perform their current function, or they determine to transfer a Designated Person to another position or group or to make modifications to a Designated Person’s current functions on the basis of a character and fitness review.
Covered Institutions should vet each Designated Person at the time that they become a Designated Person, regardless of whether the individual is currently or was previously a Designated Person at another Covered Institution. This includes the case of an organizational transaction—such as a merger or acquisition—in which an individual who served as a Designated Person at one Covered Institution joins the acquiring, purchasing, or surviving Covered Institution as a Designated Person.
The Department will review a Covered Institution’s policies, procedures, and adherence to this guidance as part of its regular examination framework.
DFS encourages Covered Institutions to comment on the Proposed Guidance. Comments are due by June 30, 2023, and should be directed to [email protected]. Comments should not contain sensitive or confidential information, as the comments may be subject to public inspection.
A copy of the Proposed Guidance can be found on the DFS Industry Letters Webpage.