FROM NYDFS SUPERINTENDENT HARRIS’ PREPARED TESTIMONY BEFORE US SENATE BANKING COMMITTEE ON DFS REFORMS FOLLOWING BANKING CRISIS:
“DFS has been monitoring the liquidity of [high risk] institutions on a daily basis, which entails frequent engagements with these institutions, as well as close coordination with our federal counterparts. . . . I directed DFS’s Office of General Counsel to review the collapse of Signature and produce a public report on the supervision and closure of the Bank. The report, released on Friday, April 28, identified recommendations the Department is implementing to modernize supervision of today’s global financial system. …[I]n the aftermath of a crisis there is always an opportunity to learn and improve. Current regulatory processes do not move at the speed and complexity of today’s financial services sector. …
The state’s FY23 budget, enacted in 2022, fully funded DFS for the first time in its history, allowing the agency to hire staff that had been needed for years. ….Even with DFS’s recent hiring success, however, a long-running failure to maintain adequate staffing levels, combined with ongoing attrition requires DFS to continue this important work of hiring in order to fully execute on its mission. As DFS continues to advance its recruitment, hiring, and retention strategies, it will do so bearing identified inefficiencies in the examination process in mind. DFS has begun reviewing examiner training to ensure new and existing DFS examiners are receiving the most up-to-date training, including ensuring the examination team is kept current on new and emerging issues that may affect a bank’s safety and soundness.
While DFS and the FDIC used the available tools to identify risks and require the Bank to take remedial actions, the Bank failed to fully address key concerns of the Regulators in a timely manner. DFS is currently developing new internal procedures for escalating supervisory areas of concern, revisiting the assumptions used to model and manage liquidity risk, and considering the addition of operational stress testing to ensure banks are ready to collect and produce accurate financial data rapidly in a crisis…. DFS will explore potential policy action and legislative recommendations to ensure DFS has additional necessary authority to hold executives accountable for critical management failures.”