The New York State Department of Financial Services (“DFS”) is proposing a new regulation that would allow banks to share confidential supervisory information with their attorneys or an independent auditor without gaining prior approval from the department.
Banks currently need written approval from DFS each time they want to share confidential supervisory information with their advisors. The proposed new regulation would streamline operations by making it easier for banks to share relevant information with their advisors.
Under the new procedures, banks may skip getting approval from the DFS if they meet certain requirements. Notably, there must be a written agreement in place with the advisor in which the advisor agrees to:
- Maintain confidential all information disclosed;
- Disclose the information only for the purpose of providing legal representation or auditing services;
- Limit the disclosure to certain employees, directors, or officers on a “need to know” basis;
- Notify DFS, promptly and in writing, of any demand or request for the supervisory information, and assert on behalf of DFS all such legal privileges and protections that DFS may request; and
- Obtain any required prior consent or approval from any other state or federal agency, and executes a statement affirming such consents and approvals were obtained, or if no other consents or approvals are required, so stating.
Banks would also have to maintain a written record of all disclosed confidential supervisory information.
Superintendent Linda Lacewell stated that the purpose of the new regulation was to “ensure [that] the department engages in an open dialogue with the financial services industry,” and that this would be one of the “many steps” that the DFS is taking to “ensure an efficient regulatory structure to assist the industry.”
The proposed regulations are subject to a 60-day comment period once they are published in the state register on November 27, 2019.