New York DFS Proposes Industry Guidance Regarding Character and Fitness Assessments

The New York Department of Financial Services (NYDFS) recently released proposed guidance for companies to use to update their framework for the review and assessment of the character and fitness of company leaders, both upon onboarding and on an ongoing basis. If adopted, the guidance will be applicable to NYDFS regulated banks and IMBs licensed or chartered under New York law. The guidance applies to each member of a covered institution’s board of directors, board of trustees, and/or board of managers, and each senior officer. While the language of the guidance encourages a “risk-based” approach to implementation and provides a sample questionnaire, a lack of specificity in some areas requires further analysis. MBA and New York MBA have submitted a letter in response to this proposal asking for a narrower scope and greater specificity on certain items to prevent varying interpretations and uncertainty.

Why it matters: Following recent high-profile bank failures, including one under the supervision of NYDFS, the Department is signaling that it expects tighter controls and scrutiny of company leaders with respect to any potential conflicts of interest or any regulatory issues at companies where they previously served.